PIA sell-off: govt set to miss IMF deadline for inviting investors

The transaction structure has to be approved by the PC board before its submission to the CCOP

ISLAMABAD:

Pakistan is set to miss the International Monetary Fund’s deadline on inviting investors for the privatisation of the national airlines before the month end, raising fresh concerns about its commitment to sell loss-making entities.

According to a top official of finance and privatisation ministry, the government has delayed a board meeting of the Privatisation Commission for approval of the transaction structure – a prerequisite for the privatisation of the Pakistan International Airlines. “The decision has been taken at the highest level in the government aimed at avoiding opening a new political front,” he claimed.



Under a structural benchmark of $6.2 billion IMF programme, the government is bound “to solicit expressions of interest for strategic private sector participation by the end of December”, according to the IMF and government documents.

The IMF has already extended the deadline for PIA’s privatisation to June next year after Islamabad failed to meet its December 2014 deadline. The lender’s reaction to any change in the government policy on PIA will be critical for Pakistan’s relations with international financial institutions.



If the government does not release an advertisement to invite investors before end of this month, it will have to seek a waiver from the IMF. However, more than the IMF conditions, the deadline will determine whether the government remains serious about privatising its loss-making entities or bows in front of the forces opposing privatisation.

The PC chairman, Mohammad Zubair, was not available for comments.



Earlier, through an ordinance the government had delayed the approval of the transaction structure amid growing opposition. The transaction structure has to be approved by the PC board before its submission to the Cabinet Committee on Privatisation (CCOP).

The PC has not yet convened a board meeting, according to an official, who said the commission has done its work and it is now up to the policymakers when and how they want to proceed with the privatisation front. Earlier this year, the government appointed financial advisers for working out the transaction structure for private sector’s participation in the core airline business. The government faced a legal hindrance in the shape of PIA Act of 1956 that barred transfer of shares to any other party.

To remove this hurdle, the government repealed the act through a presidential ordinance instead of tabling a fresh bill in parliament, creating uproar. On Monday, PPP’s Senator Saeed Ghani submitted a resolution in the Senate, pleading that the Upper House of Parliament reject the PIA Ordinance. About 51 senators from the opposition parties have signed the resolution.



The government’s privatisation programme has so far been restricted to offloading shares in profitable entities. The PIA is incurring around Rs1.2 billion losses monthly. Just this month, the government approved yet another bailout package of Rs9.4 billion for the ailing organisation.

Insiders believe the government has mishandled the PIA privatisation issue, as it is reluctant to take politically difficult decisions.

 

Published in The Express Tribune, December 29^th, 2015.