PIA consultant wants up to Rs100bn set aside to get creditors’ nod for sell-off

ISLAMABAD: The consultant hired for the privatisation of Pakistan International Airlines (PIA) has recommended the government for the provision of Rs80 to Rs100 billion as pre-requisites for getting No Objection Certificates (NOCs) from international creditors to get the state-owned entity clean, and selling it to any potential buyer(s).

The caretaker government is in a fix having as to how to move forward after negotiations held in the State Bank of Pakistan (SBP) with the domestic banks failed to materialise any deal over the government’s debt of Rs260 billion.

“Now things have become at standstill and there is no plan for cash-bleeding PIA after March 2024,” top official sources confirmed while talking to The News here on Monday.

The caretaker government wished to privatise the PIA before the general elections or at least made substantial progress towards the desired objectives but the detailed report of the consultant demonstrated that things might not move at the desired speed. The indecisiveness has played havoc with the PIA privatisation despite the commitment of the interim ministers that they would be able to make progress. Things got stuck up after the consultant report and failure to strike a deal with the commercial banks as well as getting NOC from international creditors including leasing of planes.

It was planned that a holding company would be established whereby the liabilities and outstanding amount would be shifted. Initially, the commercial banks made rough estimates that they might get Rs625 billion after maturity of five years keeping in view the existing interest rates. However, the Ministry of Finance refused to take such a burden on the national exchequer. The ministry made a counteroffer and asked the banks to fix the amount at Rs300 billion after the expiry of five years which the banks flatly refused to accept. Another proposal came under discussion that any fixed interest rate might be placed acceptable to both sides but for this purpose, the SBP was required to bring changes in its regulations.

Consultant Ernest & Young has shared its detailed report with the Government of Pakistan which was kept confidential. However, the sources confided to The News in background discussions that the consultant recommended bifurcating the entity into two parts to get a virgin operational outfit having no financial obligations or liabilities.

“The consultant has recommended the Ministry of Finance for provision of funds up to Rs100 billion as a pre-requisite to place the clean part of the PIA for offering to potential buyer,” said the official and added that the detailed report of around 300 pages floated the idea to separate the PIA into two different entities.

Caretaker Minister for Privatisation Fawad H Fawad has been making all-out efforts to move ahead but things are so complex that he might not be able to deliver on the plan to privatize the PIA. The national flag carrier has been facing difficulties in continuing its normal operation but its spokesman claimed that everything was normal and no flights were canceled.