Pakistan cabinet Approves PIA Privatization Plan, Prepares for Sale

Asma Ahmed - | World

The airline currently holds liabilities totaling $2.8 billion and has incurred accumulated losses amounting to $2.55 billion as of June of the previous year.

Pakistan's interim cabinet endorsed a privatization scheme for the financially struggling Pakistan International Airlines (PIA) on Tuesday, following directives from the country's electoral commission to abstain from finalizing any deals until the plan is reviewed.

Before starting the sale of the airline, which the electoral commission had halted pending review, getting the cabinet's approval is a crucial step.

According to a report from last week, the interim government has continued with the privatization plan for the national carrier despite the electoral commission's directive.

The prime minister's office claimed in a statement that these measures aimed to draw investors to PIA. The loss-making airline's financial difficulties are the focus of the financial restructuring plan that transaction advisor Ernst & Young completed.

The decision to advance privatization efforts despite the upcoming change in administration underscores the economic hurdles that await the new government, compounded by stringent conditions imposed by an International Monetary Fund (IMF) bailout agreement amidst soaring inflation levels in the nation of 241 million people.

Endorsing the recommendation of Pakistan's privatization commission, responsible for divesting all loss-making state-owned enterprises (SOEs), the cabinet greenlit the restructuring plan, which involves dividing PIA into two separate entities.

One entity, termed 'TopCo,' will be offered for sale, while the other will be retained within a holding company, encompassing legacy debt, including substantial loans, creditors' funds, and losses.

According to the statement from the prime minister's office, TopCo will encompass PIA's core operations, such as engineering, ground handling, cargo services, a flight kitchen, and training facilities. Meanwhile, HoldCo will include the precision engineering complex, PIA Investment Ltd., and other ancillary departments and assets.

The decision to privatize PIA follows Pakistan's commitment to the IMF in June as part of a $3 billion bailout agreement. The caretaker cabinet, appointed to oversee the recent elections, was vested with authority by the outgoing parliament to take the necessary actions to fulfill the fiscal targets outlined in the IMF agreement.

As of June last year, PIA's liabilities stood at 785 billion Pakistani rupees ($2.8 billion), with accumulated losses amounting to 713 billion rupees ($2.55 billion). Analysts predict that if the new government decides to renegotiate with the IMF after the current bailout program expires in March, the progress on privatization will be a key factor.

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Asma Ahmed
Asma Ahmed
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