The government plans to hold a final auction for the state-owned Pakistan International Airlines (PIA) in the first week of October, an official announced on Saturday. All issues related to the privatization of the national air carrier, including outstanding commercial loans, are expected to be resolved within a couple of weeks.
In June, the government announced that six companies had been qualified to bid for PIA from a pool of eight after receiving expressions of interest. Pakistan aims to sell more than 51 percent of its stake in the loss-making airline as part of economic reforms recommended by the International Monetary Fund (IMF) for a new $7 billion loan program.
However, the country’s central bank recently refused to grant a waiver or exemption to prospective buyers concerning PIA’s commercial bank loans of Rs268 billion ($971.1 million) and other financial guarantees in dollar terms, posing a challenge to the privatization effort.
“It has been mutually decided with the pre-qualified bidders to hold the final auction for PIA in the first week of October,” said Dr. Ahsan Ishaq, a spokesperson for the privatization ministry. “We have been in touch with the central bank to resolve the issue regarding all outstanding commercial loans of the national carrier before the final bid.”
The pre-qualified bidders for PIA include Air Blue, Arif Habib Corporation, Blue World City, Fly Jinnah, Pak Ethanol (Pvt) Consortium, and YB Holdings Consortium. The government initially planned to finalize the deal by August 14, Pakistan’s Independence Day, but it was delayed due to bidders requesting more time to review the airline’s latest audited accounts, aircraft lease agreements, and clarity on flights to Europe, which are currently banned.
Official data shows that there are 88 commercially operated state-owned enterprises in Pakistan, with collective losses amounting to Rs730.258 billion ($2.61 billion) in the fiscal year 2022 (FY22). The government has approved 24 state-owned enterprises for sale, including PIA, as part of a five-year privatization plan ending in 2029.
“This issue of the loans will be resolved in a couple of weeks,” Ishaq stated. “Even if the issue of the commercial loans is not resolved, the final bidder may adjust this amount in their offer.”
The top ten loss-making Pakistani entities, including PIA with Rs97.5 billion, the National Highways Authority with Rs168.5 billion, and the Peshawar Electric Supply Company Limited with Rs102.2 billion, collectively incurred losses of Rs650.197 billion ($2.33 billion) in FY22. In contrast, the remaining enterprises reported combined losses of Rs80 billion ($286 million) during the same period.
Dr. Ishaq mentioned that PIA’s cumulative losses alone had surpassed Rs800 billion ($2.86 billion), with the airline’s total asset valuation estimated at approximately Rs160 billion ($572 million). He added that the government had categorized the entities to be privatized into three phases over five years, including PIA, First Women Bank, House Building Finance Corporation, and various power generation and distribution companies.
“The government is fully focused on privatizing all state-owned enterprises to eliminate billions of rupees in annual losses,” he said. “Privatization is a time-consuming and complex process, but we are pursuing it diligently.”
