In a significant development, the federal cabinet, presided over by Prime Minister Shehbaz Sharif, has given the green light to the formation of a holding company for the privatization of Pakistan International Airlines (PIA).
During the session, which saw the participation of senior government officials including Federal Minister for Finance and Revenue Muhammad Aurangzeb, the establishment of the holding company for PIA’s privatization was hailed as a major stride forward.
Efforts to privatize the national carrier have been underway for years, with authorities working diligently to segregate the airline’s debts into a separate entity. This move aligns with the privatization plan proposed by financial advisor Ernst & Young to the caretaker government on December 27, 2023, suggesting the creation of a holding company to manage government-guaranteed legacy debt and payables held by a consortium of seven local banks.
Finance Minister Muhammad Aurangzeb also briefed the cabinet on the Staff Level Agreement (SLA) with the International Monetary Fund (IMF), highlighting its positive impact on the country’s economy and investor confidence.
Additionally, in a bid to promote austerity measures, the federal cabinet members have decided to forgo their salaries and benefits.
The decision comes in response to demands from the IMF, which has urged Pakistan to present a comprehensive plan for the privatization of PIA and other state-owned enterprises. Negotiations are intensifying between the federal government and banks to finalize the terms of a loan agreement for the privatization of PIA, with discussions hinting at a potential interest rate of up to 12 percent through term sheets with commercial banks.
Once the terms of the loan agreement are settled, banks will issue No Objection Certificates (NOCs) to proceed with the privatization process, marking a significant milestone in the government’s efforts to reform the aviation sector and enhance efficiency in state-owned enterprises.