Pakistan Moves Forward with PIA Privatisation Amid Election and IMF Concerns

In a significant step towards reform, Pakistan’s interim government has approved the partial privatisation of Pakistan International Airlines (PIA), pushing ahead with the decision despite reservations from the Election Commission of Pakistan (ECP) and last-minute concerns from the International Monetary Fund (IMF). The federal cabinet, led by caretaker Prime Minister Anwaarul Haq Kakar, greenlit the plan to sell a 51% stake and management rights in the state-owned airline, setting the stage for a major shift in PIA’s operational structure.

This move comes just days before a general election slated to usher in a new government, likely to be led by pro-privatisation figure Nawaz Sharif. The approval, announced on social media, indicates the caretaker government’s commitment to addressing the financial woes of PIA, which has long been a drain on the state’s resources.

The ECP had earlier called for a halt to privatisation efforts, arguing that such actions exceeded the interim government’s mandate. Similarly, the IMF expressed reservations about the rapid pace of the privatisation process and its implications for Pakistan’s economic stability, particularly concerning the management of PIA’s substantial debt. However, following intensive discussions, the IMF has conditionally agreed to support the privatisation initiative, offering short-term financial assistance to facilitate the transition.

To alleviate PIA’s debt burden, estimated at PKR825 billion (USD2.95 billion), the government has agreed to assume responsibility for PKR268 billion (USD958.5 million) owed to local banks, with plans to service this debt through privatisation proceeds and, if necessary, budget allocations. This strategic financial management aims to mitigate the impact on taxpayers and ensure the airline’s sustainable future.

The privatisation strategy includes the creation of two entities, TopCo and HoldCo, to streamline PIA’s operations and enhance its market appeal. TopCo will manage essential services like engineering operations and ground handling, while HoldCo will focus on complex engineering and investments. This restructuring is designed to attract investors by presenting a more efficient and financially viable airline.

As Pakistan navigates this pivotal moment, the outcome of PIA’s partial privatisation will be closely watched, both domestically and internationally. The initiative represents a bold attempt to reform the national carrier, aiming for a profitable future that benefits the government, investors, and the Pakistani public.