https://arab.news/4yn92
- Federal government last week delayed the auction of the national flag carrier for the third time
- Privatization of loss-making SOEs has long been on IMF’s list of preconditions for Pakistan
ISLAMABAD: Federal Minister for Finance and Revenue Muhammad Aurangzeb said on Tuesday the privatization process for PIA and three power distribution companies would be completed by the end of the year after the government last week delayed the auction of the national flag carrier for the third time.
Successive governments have steered away from PIA’s disposal as it is likely to be highly unpopular, but progress on privatization is a precondition for cash-strapped Pakistan attached to an International Monetary Fund (IMF) bailout approved last week.
Pakistan plans to sell more than 51 percent of its stake in the loss-making airline as part of the economic reforms suggested by the IMF which approved a long-awaited, 37-month $7 billion bailout deal last Wednesday that will require “sound policies and reforms” to strengthen macroeconomic stability and address structural challenges alongside “continued strong financial support from Pakistan’s development and bilateral partners.”
“The PIA and three DISCO’s privatization process would be made before the end of this year,” Aurangzeb was quoted by state news agency APP as saying.
“The outsourcing of Islamabad and Karachi airport would be made in phases … Right sizing and restructuring of some ministries and departments would also be made before the next fiscal year.”
The government announced in June it had selected six companies qualified to bid for PIA out of a pool of eight after receiving expressions of interest. The initial plan was to finalize the deal to sell PIA on the country’s Independence Day, Aug. 14, but the plan was delayed following requests from bidders who wanted to see the airline’s latest audited accounts and aircraft lease agreements and sought clarity on flights to Europe, which are currently banned.
This was followed by September and October dates for the auction, but those have also not materialized.
Dr. Ahsan Ishaq, a spokesperson for the privatization ministry, told Arab News last week PIA’s cumulative losses alone had surpassed Rs800 billion ($2.86 billion), with the total asset valuation of the airline standing at approximately Rs160 billion ($572 million).
In May, Prime Minister Shehbaz Sharif said Pakistan would privatize all state-owned enterprises (SOEs), with the exception of strategic entities, broadening its initial plans to sell only loss-making state firms to shore up its shaky finances.
Privatization of loss-making SOEs has long been on the IMF’s list of recommendations for Pakistan, which is struggling with a high fiscal shortfall and a huge external financing gap. Foreign exchange reserves are hardly enough to meet a couple of months of controlled imports.
The IMF says SOEs in Pakistan hold sizable assets in comparison with most Middle East countries, at 44 percent of GDP in 2019, yet their share of employment in the economy is relatively low. It estimates almost half of the SOEs operated at a loss in 2019.
Past privatization drives have been patchy, mainly due to a lack of political will, market watchers say.