Accelerated Privatisation of PIA: A Key Move by Pakistan’s New Government
The newly elected government of Pakistan, led by Shehbaz Sharif, is rapidly advancing the partial privatisation of PIA – Pakistan International Airlines, under the compelling guidance of the International Monetary Fund (IMF). In a decisive move on March 25, the government implemented a significant restructure of PIA’s board, which subsequently approved the privatisation plan promptly, showcasing the government’s commitment to swift action.
This accelerated approach comes as Pakistan nears the receipt of the final tranche of a crucial USD3 billion IMF bailout package, expected in April. The disbursement of these funds is intricately linked to the reform or sale of loss-making state-owned enterprises, including PIA, underscoring the critical nature of this privatisation effort for the country’s economic stability.
In a bid to make PIA more appealing to potential buyers, the Sharif administration has followed through on plans initiated by predecessors to alleviate the airline’s financial burden. A notable strategy includes the formation of a holding company tasked with managing state-guaranteed legacy debts exceeding USD2.23 billion, thereby cleansing PIA’s balance sheet of its hefty liabilities.
The privatisation strategy envisions selling a 51% stake in PIA along with management rights, primarily targeting foreign investors. However, the process hinges on the issuance of no-objection certificates by a consortium of local banks, a hurdle yet to be overcome due to negotiations around the interest rates for servicing the transferred debts.
Finance Minister Muhammad Aurangzeb has expressed an ambitious goal to finalize PIA’s privatisation by June, highlighting the government’s urgency in addressing this matter. The restructuring of PIA’s board and its subsequent endorsement of the privatisation plan mark significant milestones in this endeavour.
The IMF’s engagement with Pakistan’s new government has also reached a pivotal staff-level agreement for the disbursement of the remaining USD1.1 billion from the bailout package. The pursuit of an additional USD6 billion bailout hinges on Pakistan’s continued progress with its privatisation initiatives, particularly concerning PIA.
As Pakistan navigates through these critical reforms, the successful privatisation of PIA stands as a testament to the government’s resolve to fulfill international commitments and enhance the operational efficiency and financial health of one of its key state-owned entities.