Plans finalized for the sale of Pakistan
International Airlines (PIA)
In anticipation of the upcoming election, Pakistan's caretaker
government has finalized plans for the sale of the national airline, Pakistan
International Airlines (PIA), according to the minister overseeing the process
and other officials.
Traditionally, elected governments have been reluctant to
implement unpopular reforms, such as selling the national carrier. However,
amid a severe economic crisis, Pakistan committed to revamping loss-making
state-owned enterprises as part of a $3 billion bailout agreement with the
International Monetary Fund (IMF) in June.
Committee
established to expedite privatization of Pakistan International Airlines (PIA)
The decision to privatize PIA was made shortly after the signing
of the IMF agreement. The caretaker administration, in office since August and
tasked with overseeing the election on February 8, has been authorized to take
necessary steps to meet budgetary targets agreed with the IMF.
Privatisation Minister Fawad Hasan Fawad stated that the plan,
formulated by transaction adviser Ernst & Young, will be presented to the
cabinet for approval before the administration's tenure concludes after the
election. The cabinet will decide whether to sell the stake through a tender or
a government-to-government deal.
Legal
procedures completed for PIA privatization: Privatization Minister
PIA, burdened with liabilities of 785 billion Pakistani rupees
($2.81 billion) and accumulated losses of 713 billion rupees as of June the
previous year, is facing financial challenges. To facilitate the privatization,
a 51% stake with full management control is expected to be offered to buyers,
with the airline's debts spun off into a separate entity, as outlined in the
Ernst & Young report.
While details of the privatisation process had not been previously
reported, the government has fast-tracked the divestment process. In addition
to operational and technical measures, amendments to a 2016 law blocking the
majority share sale have been made.
Privatization
of PIA-owned Scribe Hotel in the pipeline
Ishaq Dar, a close aide to former Prime Minister Nawaz Sharif,
expressed confidence that the sale of PIA would be expedited if Sharif's party
wins the election. The IMF has praised measures initiated by the caretaker
government to accelerate reforms in state-owned enterprises.
The privatisation plan involves placing government-guaranteed
legacy debt and payables in a holding company, with negotiations ongoing
between the government and a consortium of seven domestic banks regarding
settlement terms. PIA's governance and safety standards have been under
scrutiny in recent years, with the airline facing operational challenges,
crashes, and a ban by the European Union Aviation Safety Agency (EASA).
While some express concerns about a hasty sale potentially
devaluing the airline, others argue that PIA's dire situation necessitates
rapid restructuring and debt clearance for a successful privatization. PIA's
assets include key airport slots and air routes, making it a valuable entity
despite its financial troubles.
Source: Reuters