In a significant development, the federal government has opted against absorbing Pakistan International Airlines’ (PIA) staggering debt of Rs. 263 billion.
Instead, it has put forth a proposal to settle the dues with nearly a dozen domestic commercial banks through the privatization proceeds of the airline.
Sources reveal that the finance ministry, backed by Prime Minister Anwarul Haq Kakar, has rejected the proposal to merge PIA’s debt into public debt, emphasizing a reluctance to leave a negative legacy by incorporating a corporation’s debt into public funds.
This decision follows PIA defaulting on over Rs. 17 billion in debt repayments to seven commercial banks by early December. Rs. 5.8 billion of this amount has been overdue for more than three months.
Finance Minister Dr. Shamshad Akhtar and Privatisation Minister Fawad Hasan Fawad held meetings to address PIA’s financial troubles.
Despite rejecting three key proposals for including PIA’s debt in public funds, the finance ministry suggested settling the debt through privatization proceeds, supporting PIA privatization without incurring additional liabilities.
In September, PIA signaled its inability to repay debts to around 12 commercial banks, escalating to Rs. 263 billion as of early December.
The privatization ministry emphasized that resolving PIA debt restructuring is linked with securing a new Rs. 15 billion loan for PIA, urging the need for a solution.
The government’s proposal would require the relaxation of the statutory liquidity requirement (SLR) by the State Bank of Pakistan.
Settlement against privatization dues would also necessitate no-objection certificates from commercial banks, potentially making these certificates part of the privatization transaction if banks agree to the proposal.
The interim government is actively pursuing the privatization of PIA, amending the Privatisation Ordinance to prevent high courts from intervening in privatization disputes. The Lahore High Court is currently hearing a petition against the potential privatization of PIA, with the judge deferring the matter until January 17th.
Justice Raheel Kamran Sheikh expressed concerns over limiting the courts’ powers in privatization matters.
The petitioner argued that the caretaker government had no jurisdiction over PIA due to its limited scope and authority.
This week, the federal cabinet approved new Privatisation Appellate Tribunals for hearing privatization cases, with ongoing cases transferred from high courts to the tribunals. However, the provincial court has not yet dropped the PIA case.
The government’s push for fast-track privatization remains a focal point amid these developments.
