Pakistan’s PIA Clarifies Misunderstanding Over Alleged PKR17 Billion Debt Default
Pakistan International Airlines (PIA) has recently addressed concerns surrounding a reported PKR17 billion rupee (USD60.8 million) debt repayment default. The national carrier firmly denied these claims, attributing the misunderstanding to a misinterpretation of its balance sheet restructuring proposal, which has not been approved by Pakistan’s Ministry of Finance.
The confusion arose from a report by Pakistan’s NetMag portal, which claimed that PIA failed to make repayments to several commercial banks, including the National Bank of Pakistan (NBP), JS Bank Limited, Al Baraka Bank, Bank of Punjab, and Habib Bank Limited. The report suggested that PIA missed its debt obligations earlier in December.
A spokesperson for PIA clarified to ch-aviation that the situation was not a default but rather related to a proposal for balance sheet restructuring. This proposal, which involved merging government-guaranteed loans into public debt, was not accepted by Pakistan’s caretaker government. The spokesperson emphasized that this was just one of several options under consideration and not the final solution.
PIA’s total debt stands at approximately PKR263 billion (USD931 million), owed to a consortium of 12 banks. Historically, the Pakistani government has often provided last-minute financial bailouts to the airline. However, recent administrations have adopted a stricter fiscal approach, reducing bailouts and pushing PIA to rely more on commercial banking solutions.
The government’s current strategy involves partially privatizing PIA, using the proceeds to settle the airline’s debts. The Bank of Punjab has the largest exposure among the banks with loans to PIA. Other banks with significant loans include Askari Bank, Faysal Bank, Bank Islami Pakistan, Al Baraka Bank Pakistan, and Soneri Bank.
According to reports, Pakistan’s Finance Ministry, overseeing PIA’s partial privatization, is considering allocating a substantial portion of the raised funds towards settling PIA’s debts. However, the exact capital-raising target remains undisclosed.
In a separate development, a consortium of six banks proposed a PKR15 billion (USD53.1 million) loan to PIA, demanding sovereign guarantees, collateral, and other conditions. The proposal included a settlement plan for PIA’s existing PKR263 billion debt and specific revenue allocations. The Finance Ministry, however, declined this offer, citing concerns over its suitability for PIA and potential conflicts with the ongoing International Monetary Fund support program in Pakistan.
PIA’s financial challenges continue as it navigates through its restructuring process, with the airline’s day-to-day funding relying heavily on cooperation from Pakistan’s financial institutions. The national carrier’s efforts to address its debt issues are part of a broader attempt to stabilize and revitalize its operations in the competitive aviation industry.