IMF approves concessions for PIA privatization
The International Monetary Fund
(IMF) has approved critical concessions aimed at facilitating the privatization
of Pakistan International Airlines (PIA). These measures include an 18% sales
tax exemption on leased aircraft and the transfer of additional liabilities to
a holding company, reigniting hopes for the airline's sell-off.
The IMF’s approval, though pending
formal confirmation, comes after months of negotiations involving Pakistan’s
Finance Ministry, Privatisation Commission, and the global lender.
Officials revealed that prospective
investors will now be exempt from paying the 18% sales tax on leased or newly
acquired aircraft, a sticking point that had previously deterred serious
bidders.
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Deputy Prime Minister Ishaq Dar
recently received a briefing on the privatization efforts, with officials
expressing optimism that these concessions will revive the long-stalled process
for the financially struggling airline.
Past privatization attempts
faltered, including an instance where a real estate developer’s Rs10 billion
offer for a 60% stake fell well below the Rs85.03 billion minimum reserve
price. Investors had also demanded the write-off of Rs45 billion in additional
liabilities and tax exemptions on aircraft leases.
In response, the government divided
PIA into two entities, transferring Rs623 billion in liabilities to a holding
company. The Privatisation Commission presented these structural changes to the
IMF, arguing that they are essential to aligning PIA’s privatization with
global industry standards.
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In a parallel development, the
Finance Ministry finalized the sale of PIA’s Precision Engineering Complex
(PEC) to the Pakistan Air Force for Rs6.5 billion. The deal includes Rs2.5
billion in cash over five years and Rs3 billion in liabilities covering
pensions and provident funds. PEC was previously separated from PIA’s core
operations and added to the holding company.
PIA’s privatization will also depend
on an aviation ministry business plan requiring $500 million in investment and
the acquisition of new aircraft. The sales tax waiver may be restricted to
planes operating on international routes to ensure local airlines are not
disadvantaged.
Source: Profit Pakistan