Carriers could divert operations over failure to repatriate dollars from Pakistan — airlines body

In this file photo, taken on May 8, 2018, Pakistani airport workers load baggages into a plane at Islamabad International Airport. (Photo courtesy: AFP/File)
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Updated 03 April 2023
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Carriers could divert operations over failure to repatriate dollars from Pakistan — airlines body

  • International Air Transport Association says $290 million stuck in Pakistan, some payments pending since last year
  • Pakistan is holding the second-largest amount of foreign currency from airlines globally, after Nigeria

KARACHI: The International Air Transport Association (IATA) on Monday called Pakistan a “very challenging environment” to operate in and said airlines could consider diverting their operations as they struggled to repatriate upwards of $290 million dollars from the crisis-hit South Asian nation.

Pakistan has restricted the outflow of USD amid depleting foreign exchange reserves with the State Bank, which currently stand at $4.2 billion, barely enough to cover the import bill for three weeks against the average $5 billion required per month.

Air carriers, which sell tickets in local currency but need to repatriate dollars to pay for expenses such as fuel, have been hit particularly hard in Pakistan, which is holding the second-largest amount of foreign currency from airlines globally, after Nigeria.

“In general, over time, if conditions persist that make the economics of operation to a country unsustainable, one would expect airlines to put their valued aircraft assets to better use elsewhere,” Albert Tjoeng, Head of Corporate Communications at IATA, said in an email to Arab News query on Monday.

Philip Goh, IATA's Regional Vice President for Asia Pacific, urged the government to increase the allocation of foreign exchange to airlines operating in Pakistan.

“A significant portion of an airline’s operational costs, such as maintenance, over-flights and fuel, are denominated in US dollars and settled through its head office,” Goh said.

“The currency repatriation challenges impact airlines’ timely access to its collection proceeds to meet payment obligations and increase the exposure to adverse foreign exchange movements … We are urging the government to increase the allocation of foreign exchange to airlines operating in Pakistan.”

“Pakistan is currently a very challenging environment for airlines to operate in,” Goh added. “The government has a Federal Excise Duty (FED) on air tickets for premium travelers, and is proposing to increase it which will make it more expensive to travel, and will dampen the demand for air travel.”

The IATA official said Pakistan’s foreign exchange controls were affecting the ability of foreign companies to repatriate their funds out of Pakistan and some airlines had funds stuck in Pakistan from sales even in 2022.

“Furthermore, the process for applying for currency repatriation is onerous. Airlines are required to provide an auditor’s certificate with each remittance showing the amount to be remitted,” Goh said. 

“This forces them to undergo a monthly audit process (instead of an annual audit). And it adds to the operating costs in Pakistan and prolongs the process."

Goh said with a population of over 220 million people, Pakistan was a huge aviation market but only 10.6 million people flew internationally in 2021-2022: “You can imagine the potential yet to be realized.”

In an IATA study in 2018, the number of air passengers in Pakistan had the potential to reach more than 35 million by 2038, contributing $9.3 billion in GDP and supporting almost 800,000 jobs, IATA’s regional vice president said.

However, both IATA officials said the decision to suspend operations was a commercial one, which would be made by each individual airline based on their circumstances.

Pakistan has been in economic turmoil for months with an acute balance of payments crisis while talks with the IMF to secure $1.1 billion funding as part of $6.5 billion bailout agreed in 2019 have not yet yielded fruit.


Pakistan says holds ample petroleum reserves amid fears of Iran’s closure of Strait of Hormuz

Updated 23 June 2025
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Pakistan says holds ample petroleum reserves amid fears of Iran’s closure of Strait of Hormuz

  • Iran’s parliament has approved cutting off the narrow shipping lane through which about 20 percent of global oil and gas passes
  • State Minister Bilal Azhar Kayani says no cause of concern for Pakistanis, government prepared to address any uncertainties

ISLAMABAD: Pakistan has ample petroleum reserves and an uninterrupted supply chain, a junior minister said on Monday, amid fears that Iran may cut off a vital oil and gas shipping lane in retaliation for US strikes on its nuclear facilities.

Iran’s parliament has approved cutting off the Strait of Hormuz, a narrow shipping lane in the Arabian Gulf through which about 20 percent of global oil and gas passes. It’s now up to Iran’s national security council to decide whether to move forward with the idea, which could lead to a spike in the cost of goods and services worldwide.

The price of oil jumped 4 percent shortly after trading began on Sunday night, but it quickly pared back as the focus shifted from what the US military did to how Iran would react. Oil futures were flip-flopping in Monday morning trading between gains and losses. They still remain higher than they were before the fighting began a little more than a week ago.

Pakistan’s State Minister for Finance and Railway Bilal Azhar Kayani denied rumors about a shortage of petroleum products in the South Asian country, stressing that his government was closely monitoring developments following tensions between Iran, Israel and the US to ensure stability.

“The Oil and Gas Regulatory Authority (OGRA) has directed all oil marketing companies to strictly maintain mandatory reserve levels in light of current global conditions, mitigating potential risks,” Kayani was quoted as saying by Pakistan’s Press Information Department.

“There is no cause for concern as petroleum product inventories are sufficient and supply operations continue smoothly across the nation.”

The statement came hours after President Donald Trump called for the US and other oil-producing economies to pump more oil as the White House sharpened its warnings to Iran against closing the Strait of Hormuz.

Global markets were trying to ascertain what lays ahead after the US struck on Sunday key Iranian nuclear facilities with a barrage of 30,000-pound bunker busting bombs and Tomahawk missiles.

Pakistan lacks adequate resources to run its oil- and gas-powered plants and mainly sources its oil from Arab Gulf nations.

Kayani reassured citizens that the Prime Minister’s office, Ministry of Petroleum and the Ministry of Finance were continuously monitoring the situation.

“We are fully prepared to address any uncertainties,” he said, adding the government was committed to ensuring the country’s energy security.


Pakistan extends airspace closure for Indian aircraft until July 23

Updated 23 June 2025
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Pakistan extends airspace closure for Indian aircraft until July 23

  • The restriction was first imposed in Apr. as part of tit-for-tat measures by India and Pakistan after an attack in disputed Kashmir
  • The attack, which India blamed on Pakistan without offering evidence, led to a four-day military conflict between the two countries in May

ISLAMABAD: Pakistan has extended for the second time its airspace ban on Indian aircraft until July 23, the Pakistan Airports Authority (PAA) said on Monday, citing continued tensions between the two countries.

The restriction was first imposed on Apr. 24 as part of a series of tit-for-tat measures announced by both India and Pakistan, days after an attack in Indian-administered Kashmir.

India blamed Pakistan for the assault that killed 26 tourists, Islamabad denied the allegation and called for a credible international probe into the incident. Both countries later engaged in a four-day military conflict in May.

“The ban on Indian aircraft from entering Pakistani airspace has been extended by one month,” the PAA said in a statement. “Pakistani airspace will remain closed to Indian aircraft until July 23, 2025.”

The ban applies to passenger and military aircraft operated by Indian airlines, according to the PAA. A Notice to Air Missions (NOTAM) has also been issued in this regard.

“Any aircraft registered in or leased by India would also be prohibited from using the Pakistani airspace,” the authority added.

Pakistan had previously extended the ban till June 24. It has forced Indian airlines to reroute their flights, resulting in increased fuel consumption, longer travel times and higher operational costs.

Air India, which operates numerous flights to Europe and North America, estimated in May that the airspace ban could lead to approximately $600 million in additional expenses over the course of a year and requested compensation from the Indian government.


Pakistan stocks, rupee plunge as investors react to US strikes on Iran

Updated 23 June 2025
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Pakistan stocks, rupee plunge as investors react to US strikes on Iran

  • Benchmark KSE-10 Index dropped more than 3 percent to the lowest in over six weeks
  • Analysts say if there was no further escalation, value buying is expected to come through

KARACHI: Pakistan’s stocks and currency markets tumbled on Monday as investors reacted to the United States’ (US) foray into the Israel-Iran conflict, traders and analysts said.

The benchmark KSE-100 index dropped more than 3 percent to 116,167 points, the lowest in more than six weeks, while the rupee continued to weaken against the US dollar in the seventh consecutive session on Monday.

The index has plunged by nearly 5 percent since June 13 when Israel first hit Iranian military and nuclear targets in Natanz, Isfahan and Fordow, killing top generals and scientists among 78 people.

“Rising geopolitical tensions following a US strike on Iran shook investor confidence, causing the KSE-100 Index to drop by 3.2 percent,” Mohammad Waqas Ghani, head of research at JS Global Capital Ltd., told Arab News, adding that this was the fourth largest single-day decline in terms of points historically.

The attacks on Iran by the US, which followed Israeli strikes, have intensified the war and deepened geopolitical tensions in the Middle East, sending jitters to markets across the globe.

Monday’s 3.2 percent fall was the worst since May 8 when the index had plunged 5.9 percent day-on-day, according to Ghani.

“The spike in global oil prices has further intensified concerns about Pakistan’s external account vulnerabilities,” he added.

Cash-strapped Pakistan, which is trying to revive its debt-ridden economy with the help of International Monetary Fund’s $7 billion program, spent $17 billion on oil imports last year.

Raza Jafri, head of research at Intermarket Securities Ltd., attributed the day’s fall to redemptions at mutual funds and possible margin calls.

“Regional tensions are the main reason behind the weak sentiment,” he said, adding that if there was no further escalation, the value buying was expected to come through.

RUPEE DROP

The ongoing tensions have also impacted the Pakistani currency that lost another 0.06 percent as the greenback closed at Rs283.87, according to State Bank of Pakistan (SBP) data.

The rupee is constantly falling and has devalued 0.3 percent since the start of Iran-Israel conflict.

“The rupee is feeling the heat of this war, very negligibly though,” Zafar Paracha, secretary-general of the Exchange Companies Association of Pakistan, told Arab News.

“This stability in the exchange rate reflects the overall macroeconomic stability the country has achieved.”


Pakistan’s top security body backs Iran’s right to self-defense after US, Israeli strikes

Updated 23 June 2025
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Pakistan’s top security body backs Iran’s right to self-defense after US, Israeli strikes

  • Pakistan, Russia and China have called for a ceasefire after the strikes raised fears of a wider conflict in an already volatile region
  • Experts say Pakistan, which shares border with Iran, will face additional security and economic challenges due to the worsening conflict

ISLAMABAD: Pakistan’s National Security Committee (NSC), which comprises top civilian and military leaders, has reaffirmed its support for Iran’s right to self-defense, Prime Minister Shehbaz Sharif’s office said on Monday, after United States and Israeli strikes on Iran.

The statement came a day after US attacks on three Iranian nuclear sites, joining Israel in the biggest Western military action against the Islamic Republic since its 1979 revolution.

As the strikes raised fears of a wider conflict in the already volatile region, Russia, China and Pakistan have urged the United Nations Security Council to adopt a resolution calling for an immediate and unconditional ceasefire in the Middle East.

On Monday, Pakistan PM Sharif presided over an NSC meeting to review the evolving regional situation and condemned Israeli attacks on Iran, which it said coincided with a constructive negotiation process between Iran and the United States.

“These reckless actions have escalated tensions, threatening to ignite a wider conflict and diminishing the opportunities for dialogue and diplomacy,” Sharif’s office said in a statement after the meeting.

“The NSC reaffirmed Iran’s right to self-defense as enshrined in the UN Charter.”

The NSC expressed grave concern over the potential for further escalation after the attacks on Iranian nuclear facilities in Fordow, Natanz and Isfahan by the US, reiterating that they violated the resolutions of the International Atomic Energy Agency (IAEA), relevant international law, and the UN Charter.

The forum reaffirmed Pakistan’s readiness to continue efforts to promote regional peace and stability and called on all parties to resolve the conflict through dialogue and diplomacy.

Tensions between Tehran and Tel Aviv initially flared on June 13 when Israel launched airstrikes against what it described as Iran’s military leadership and nuclear infrastructure. Both sides traded missiles on Monday in fresh strikes.

In a separate development, Pakistan PM Sharif spoke with Iranian President Masoud Pezeshkian on Monday afternoon — their second telephonic call in less than 48 hours.

“The Prime Minister conveyed Pakistan’s condemnation of the US attacks, which followed Israel’s unprovoked and unjustified aggression,” Sharif’s office said. “He reaffirmed Pakistan’s unwavering solidarity with the brotherly people and Government of Iran.”

The prime minister expressed concerns that the US strikes had targeted Iranian facilities that were under the safeguards of the International Atomic Energy Agency (IAEA), constituting a “serious violation of international law and the IAEA Statute.”

“While noting Iran’s right to self-defense, as enshrined under Article 51 of the UN Charter, the Prime Minister stressed upon the need to immediately return to dialogue and diplomacy as the only viable path forward,” the statement read. “He also called for urgent collective efforts to de-escalate the situation.”

Earlier on Monday, Pakistan’s UN Ambassador Asim Iftikhar Ahmad called on the Security Council to act “urgently and decisively,” warning against the danger posed to the populations of the region as the war intensifies.

Experts warn Pakistan, which shares a 900-kilometer porous border with Iran in its southwestern region prone to separatist militancy and cross-border attacks, will face additional security and economic challenges due to the worsening conflict between Tehran and Tel Aviv.

Surging global oil prices due to the worsening conflict will cause economic setbacks for Pakistan, which relies on expensive fuel imports for its energy demands, according to financial analysts. Islamabad is already grappling with a macroeconomic crisis amid a precarious balance of payment position.

The crisis also raises questions about how Islamabad will navigate its delicate balancing act between Iran, other Gulf partners, and the US, which remains one of Pakistan’s largest trading partners and a critical source of military and economic assistance.


Pakistan cuts 50 percent export charges at major port to boost trade, economic growth

Updated 23 June 2025
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Pakistan cuts 50 percent export charges at major port to boost trade, economic growth

  • The reduction in charges at Port Qasim is part of government reforms to enhance trade facilitation
  • Pakistan plans to establish an industrial zone to promote marine, aquaculture sectors, minister says

KARACHI: The Pakistani government has reduced port charges for exporters by 50 percent at the country’s second biggest Port Qasim, the Pakistani maritime affairs ministry said on Monday, amid efforts to boost trade and economic growth.

The development came after a strategic roadmap meeting of the ministry, at which Maritime Affairs Minister Junaid Anwar Chaudhry emphasized the government’s commitment to creating opportunities for local businesses and encouraging trade through ports and fisheries.

Pakistan is striving to boost trade and investment amid a gradually healing macroeconomic environment after a prolonged downturn that forced Islamabad to seek external financing from friendly nations and multiple loan programs with the International Monetary Fund (IMF).

“The government’s reform agenda in the maritime sector, including the charge reduction at Port Qasim, signals a strong commitment to supporting the business community, enhancing trade facilitation, and promoting economic development across coastal regions,” he was quoted as saying.

Officials briefed the participants that the Marine Fisheries Department had met its export target of $410 million this fiscal year through fisheries and aquaculture exports, according to the maritime ministry. Additionally, the ship recycling industry had generated a revenue of Rs6 billion ($21.1 million), reflecting the growing potential of maritime industries in the country.

Chaudhry said the government is focused on modernizing port infrastructure, streamlining customs operations, and fostering a business-friendly environment to enhance Pakistan’s competitiveness in international trade.

“The Ministry of Maritime Affairs is actively working on reforms to unlock the economic potential of vast coastline and maritime resources,” he said. “These efforts are part of a broader strategy to transform the maritime sector, boost exports, and contribute significantly to the country’s GDP.”

He announced his ministry’s plans to establish an Aquaculture Industrial Zone aimed at promoting business activities in the marine and aquaculture sectors.

“Pakistan’s first-ever Marine and Aquaculture Policy will be introduced soon to provide a comprehensive framework for sustainable development in these areas,” he said.