Election Uncertainty Casts Shadow over PIA Privatization Plans
As Pakistan approaches its general election on February 8, the nation’s interim government faces mounting pressure to finalize decisions regarding the partial privatization of Pakistan International Airlines (PIA). This process, championed by Caretaker Prime Minister Anwaar ul-Haq Kakar’s administration, aims to privatize 51% of the state-owned carrier. However, recent reports from the Express Tribune suggest that crucial deadlines have been missed, casting doubt over the timely completion of this initiative.
A key step in the privatization process involves separating PIA’s core and non-core entities, a requirement that has hit a snag. The Scheme of Arrangement for this division was not submitted to the Securities and Exchange Commission of Pakistan, owing to the absence of statutory audited accounts for the period up to September 2023 and the necessary no-objection certificates from creditors.
The method of selling PIA remains undecided, with the government contemplating either a negotiation with a foreign entity or a public competitive process. Both the Special Investment Facilitation Council (SIFC) and other government agencies involved have missed deadlines related to these decisions, further complicating the situation.
Another critical aspect yet to be resolved is the formal endorsement by Pakistan’s Cabinet Committee on Privatization and the federal cabinet for the Privatization Commission’s recent decision to sell a 51% stake in PIA, separate its assets, and transfer its debts.
PIA’s considerable debt, estimated at PKR 825 billion (approximately USD 2.95 billion), poses a significant challenge to the privatization. The government’s plan to offload around PKR 640 billion (USD 2.29 billion) of this debt aims to make the airline more attractive to potential buyers. However, questions remain about which government ministry will assume these liabilities and the extent of debt write-offs, especially with several ministries, including the Ministry of Finance, showing reluctance to absorb PIA’s debts.
The upcoming election adds another layer of uncertainty to the privatization process. Former Prime Minister Nawaz Sharif, supported by the military and expected to return to power, has historically favored privatization but never implemented it during his terms. In contrast, Imran Khan, the jailed former cricketer with substantial grassroots backing, has opposed such privatization efforts. The election’s outcome could significantly influence the direction of PIA’s privatization, making it a topic of keen interest in both the aviation industry and the political arena.