Pakistan's crisis-hit economy has made it difficult for foreign airlines to operate in the country and repatriate their earnings, according to a warning from the global airline industry body.

Pakistan is grappling with a mounting financial crisis due to dwindling foreign reserves causing deficits and elevated prices of indispensable commodities.

Firms are facing obstacles in currency conversion or imports, and analysts caution that the country could default.

Air carriers selling tickets in local currency and needing dollars to pay for fuel and other expenses are struggling due to Pakistan's withholding of foreign currency.

The International Air Transport Association reported that $290 million of funds were stuck in the country as of January, which is up almost 33 per cent from December.

This issue is affecting airlines on a global scale, with Pakistan holding the second-largest amount of foreign currency after Nigeria.

Virgin Atlantic has ended its services to Pakistan, which began two years ago. Issues with repatriating funds played a part, but the suspension was mostly due to the route's economic viability, as reported by an individual with knowledge of the call.

With foreign reserves around $4 billion, Pakistan can only cover a month of imports. Previously imposed import and currency controls have been lifted this year to help revive the $7 billion IMF bailout.

Eased limits caused a backlog of dues, delaying certificate issuance to convert currency with local banks, as per analysts and executives.

Banks in Pakistan have been paying airlines since currency restrictions eased. However, the country is facing additional challenges in financing food and medicine imports, leading to a higher demand for payments.

Honda, Toyota, and Suzuki's local units have suspended manufacturing for March. These shutdowns are causing problems for other industries as well. Companies like British International Investment's investee companies are now struggling to pay foreign contractors.

Inflation's impact on foreign reserves has made repatriating dollars a worldwide aviation challenge. With Nigeria obstructing more funds than any other country, Emirates halted flights there.

The Pakistani senate committee requested the aviation ministry to encourage airline operations to resume, as reported by The Financial Times.

Foreign airlines are lagging in their return to Pakistan as per aviation analytics company Cirium, which reported fewer flights in March 2023 compared to 2019, pre-pandemic.

Cirium found Emirates saw a decline of 24 per cent, while Saudia, the Saudi state carrier, experienced a decrease of 17 per cent in the total number of flights.

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