IMF has asked Pakistan’s privatization commission to sell 51% to 100% stakes of Pakistan International Airlines (PIA) as part of reforms, according to an official statement.
According to British news agency Reuters, the privatization of PIA is a step that previous elected governments have shied away from due to potential unpopularity, but the progress on privatization will help Pakistan negotiate further funding with the IMF.
In a newspaper advertisement, PIA has set a deadline of May 3 to solicit expressions of interest from interested buyers and has appointed a financial advisor for the deal.
The privatization commission stated on its website that “possible investors for PIA are being offered more than 51% stakes in its ‘debt lite’ new avatar.” It further stated that the goal of the privatization panel is to sign the deal on shares’ valuation by completing all stages of the buying and selling by June 24.
The panel mentioned that Pakistan holds the highest 23% share in PIA in the country’s aviation market and the airline can surpass the historical level of 30%. PIA has 34 aircraft in its fleet and has agreements for air services with 87 countries, as well as landing slots at airports such as London Heathrow.
According to the organization’s new setup, obligations worth Rs. 603 billion will be transferred, leaving Rs. 203 billion on the balance sheet for the acquired business.
In the presentation of the privatization commission, it was further stated that PIA broke its earnings from interest, taxes, depreciation, amortization, and restructuring or leasing costs in 2023, which was a prediction that was continued in 2024.
In addition to losses and debts, global aviation regulators have questioned PIA’s governance and safety standards for several years.
After the crash of a PIA plane in Karachi in 2020, killing nearly 100 people and a fake pilot license scandal, the European Union Aviation Safety Agency had imposed restrictions on the airline’s access to the EU and the UK’s most lucrative routes.
The government has informed the parliament that this restriction, which had an annual revenue of almost Rs. 40 billion for the airline, is still in place.
The offer of shares is consistent with an agreement with the International Monetary Fund (IMF), which provided Pakistan with a $3 billion bailout in June. Pakistan is trying to start negotiations with the IMF for a mid-term program to improve the struggling economy with low reserves, exchange rate fluctuations, and external financial needs.
The IMF wants reforms in state-owned enterprises that clearly articulate ownership and government roles.
After an increase of more than 403% in the last six months, shares of the airline fell by 7.5% in intraday trading on Tuesday in the airline’s share intra-day trade after reaching the lower limit.
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