ISLAMABAD, (TDI): The International Monetary Fund (IMF) has agreed to key concessions that could pave the way for the privatisation of Pakistan International Airlines (PIA).
Among the agreements is a waiver on the 18% sales tax for leased aircraft, which had previously deterred potential investors.
Additionally, PIA’s liabilities, amounting to billions of rupees, will be transferred to a holding company to make the airline more attractive to buyers.
These moves follow months of negotiations between Pakistan’s Finance Ministry, the Privatisation Commission, and the IMF.
In previous attempts to privatise PIA, investors expressed concerns over high liabilities and the tax burden. A real estate developer’s bid to acquire a 60% stake in the airline for just Rs10 billion had fallen far short of the government’s Rs85.03 billion reserve price.
Investors had also requested the government write off Rs45 billion in additional liabilities and grant sales tax exemptions on leased aircraft.
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In response, the government restructured PIA by splitting it into two entities, transferring Rs623 billion in liabilities to the holding company.
The Privatisation Commission has since argued that these changes, along with the IMF’s agreement, are critical for making the airline’s privatization feasible and in line with global standards.
PIA Assets sale
Meanwhile, the Finance Ministry has finalised the sale of a non-core PIA asset—the Precision Engineering Complex (PEC)—to the Pakistan Air Force for Rs6.5 billion.
This transaction includes Rs2.5 billion in cash payments spread over five years, along with Rs3 billion in liabilities related to pensions and provident funds.
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Despite these developments, the successful privatisation of PIA remains contingent on additional investments.
The aviation ministry’s business plan calls for $500 million in capital to acquire new aircraft, with the sales tax waiver likely restricted to planes used on international routes to prevent unfair competition with local airlines.
These concessions, pending formal IMF approval, are seen as a significant step toward reviving PIA’s privatization efforts and addressing the airline’s ongoing financial struggles.
