Islamabad: According to the minister in charge of the process and senior officials, Pakistan’s caretaker administration is drafting legally binding plans for a new government to sell loss-making Pakistan International Airlines ahead of elections that take place next week.
Historically, elected administrations have resisted implementing unpopular policies, such as selling the flag carrier. However, as part of a $3 billion bailout agreement with the International Monetary Fund (IMF), Pakistan—which is experiencing a severe economic crisis—agreed in June to restructure financially failing state-owned businesses.
Only a few weeks after signing the IMF agreement, the government opted to privatize PIA. The departing parliament gave the caretaker administration, which assumed office in August to supervise the election on February 8, the authority to take all necessary actions to fulfill the financial goals that were agreed upon with the IMF.
When questioned about the plan to sell the airline, Privatization Minister Fawad Hasan Fawad told Reuters, “Our job is 98% done.” “The remaining 2% is just to bring it on an excel sheet after the cabinet approves it.”
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The plan, which was created by transaction adviser Ernst & Young, would be submitted to the cabinet for approval prior to the administration’s expiration after the election, according to Fawad. According to Fawad, the cabinet will also determine whether to sell the interest through a government-to-government agreement or through a tender.
“What we have done in just four months is what past governments have been trying to do for over a decade,” Fawad stated. “There is no looking back.” Nothing has been published before regarding the specifics of the privatization process.
As of June of last year, PIA had liabilities of 785 billion Pakistani rupees ($2.81 billion) and cumulative losses of 713 billion rupees. According to its CEO, the company would probably have lost 112 billion rupees in 2023.
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Once the present bailout package expires in March, if the future government goes back to the IMF, progress on the privatization will be a critical issue. Last year, Pakistan’s acting finance minister Shamshad Akhtar informed reporters that Pakistan would need to continue participating in IMF programs after their expiration.
According to the 1,100 page Ernst & Young analysis, purchasers would be offered a 51% interest with complete management authority after the airline’s debts were parked in a different business, two people close to the process told Reuters.
The report’s contents could not be independently verified by Reuters. Fawad acknowledged that the proposal called for the carrier’s debts to be spun off into a different company, but he did not provide any information about the amount of the stake to be sold.
Requests for comment from Ernst & Young were not answered. PIA spokesman Abdullah Hafeez Khan stated that the airline was offering the transaction counsel “full cooperation” as part of its support for the privatization process.