— Former SBP governor Tariq Bajwa appointed chairman of the 11 member board as plans for privatisation enter vital phase-II stage
ISLAMABAD: Plans to privatise Pakistan International Airlines (PIA) have entered phase two with the appointment of an 11-member board that will oversee a holding company that manages the national carrier’s assets.
The government, it seems, is in a hurry to complete plans for the privatisation of the PIA. Part of the reason could be that Prime Minister Shehbaz Sharif’s finance team is currently gearing up to enter yet another programme with the International Monetary Fund (IMF). Back in June 2023, Shehbaz Sharif’s previous government had agreed to overhaul loss-making state-owned enterprises under a deal with the IMF for a $3 billion bailout. The PIA represents the largest and most significant of these SOEs.
Not the first time
The deal was struck at a time when Pakistan was teetering on the edge of default. The PDM government had no choice but to agree even though different governments throughout the country’s history have shied away from having the stain of privatising Pakistan’s national airline on their track record.
Plans to privatise PIA, however, seem to continuously get hampered. This is not the first time that the airline has reached phase II of privatisation either. Back in January 2018, the then PML-N government had first announced it was planning to establish another company under which all the fixed assets of PIA would be managed.
There was also an attempt by Anwar ul Haq Kakar’s caretaker cabinet to privatise PIA. However, these plans were thwarted when the ECP invoked Article 230 of the Constitution, outlining the caretaker government’s roles and limitations, and stopped them from completing the process.
The government, however, was also facing increasing pressure because of the debt burden being caused by the PIA. In February this year, the Finance Ministry and the Privatisation Ministry locked horns over the transfer of the national carrier’s debt liabilities worth Rs 1.7 trillion to the government.
What are the steps ahead?
As things stand, the government has to go through a detailed 30 step process to privatise the national airline.
A significant hurdle in the process involves obtaining No-Objection Certificates (NOCs) from around 35 lenders, a task with an unpredictable timeline due to PIA’s financial struggles. This step is critical for maintaining the airline’s operations and is indicative of the complexities involved in the privatisation efforts. Compared to past privatisations, such as the Heavy Electrical Complex which took two years to transition to new ownership despite concluding the Sale Purchase Agreement in 2022, the PIA privatisation stands out for its complexity. Achieving this within a year would be considered a significant accomplishment. Despite prior commitments to Prime Minister Shehbaz Sharif for a swift transaction, possibly by June 2024, sources critique these promises as overly optimistic.
Part of the preparation involves PIA’s division into two separate entities, a process entailing multiple steps itself. The liabilities and assets of the PIA will now be transferred to the PIA Holding Company. The holding company will be led by former Governor State Bank of Pakistan Tariq Bajwa as Chairman.
