IMF agrees to delay PIA sell-off for six months

Understanding reached during talks over the 10th review of Pakistan’s economy

ISLAMABAD:

Pakistan and the International Monetary Fund have reached a staff-level understanding to delay privatisation of Pakistan International Airlines by about six months, allowing the government to review its policy that has drawn the opposition’s wrath.

The understanding was reached during the last round of Pakistan-IMF talks in Dubai, according to officials of the Ministry of Finance and Privatisation. The talks under the 10th review of Pakistan’s economy were the toughest among all rounds held over the last two years, they added.



The IMF staff has agreed to relax the condition of inviting expressions of interest (EoIs) from prospective bidders till May 15, said the officials who attended the talks in Dubai. However, the understanding is subject to approval of the IMF management and Executive Board, they added.

The IMF was extremely critical of the government’s failure to move ahead with privatisation deadlines of PIA, Pakistan Steel Mills (PSM) and Faisalabad Electricity Supply Company (Fesco), the officials revealed. This was despite the fact the Privatisation Commission had done the requisite technical work but transactions, particularly of Fesco, could not be carried out due to lack of political will.



The understanding was reached amid violent demonstrations by PIA employees which resulted in the death of two protesters on Tuesday. Due to the deteriorating law and order situation, the chief of the IMF mission in Pakistan, Harald Finger, cancelled his scheduled visit to Islamabad, the finance ministry confirmed.



Instead of continuing the confrontational strategy, Privatisation Commission Chairman Mohammad Zubair proposed that the prime minister set up a committee and immediately invite PIA union leaders to the negotiating table.

The government had lately engaged the PIA union through Senator Mushahidullah Khan but could not resolve the issue. The finance ministry also wasted over 10 months in building political consensus over the legal changes needed in the PIA Act before privatisation.

In February last year, the Privatisation Commission had come to know that the PIA Act had to be amended to transfer shares to prospective buyers. However, the finance ministry wasted precious time and promulgated a presidential ordinance at the eleventh hour, which was eventually struck down by the Senate.

Under a condition of the $6.2 billion IMF loan programme, Pakistan was bound to invite investors to participate in PIA’s privatisation through media advertisements by December 31, 2015, and sell off the carrier by June this year. The officials said the June 2016 deadline would also be relaxed accordingly.

Pak-IMF talks are moving positively towards a conclusive stage, according to a brief statement released by the finance ministry on Wednesday.

The officials said May 15 would also be the deadline for showing progress on Fesco and PSM. The Ministry of Water and Power is a staunch opponent of the power sector privatisation while the government has offered PSM to the Sindh government.

Govt bans union activity to prevent PIA strike 

The PIA privatisation policy remains ambiguous, as the government gave confusing messages to the political parties and the employees. Finance Minister Ishaq Dar has long been insisting the government was not privatising PIA but only looking for a ‘strategic partner’.

The government’s decision to declare the air service as an essential service also complicated matters, particularly at a time when the employees were already on the roads, said the officials.

Recent briefings by the PIA management to the National Assembly Special Committee on PIA Privatisation revealed that the national flag carrier suffered more because of giving landing rights to other airlines without ensuring a reciprocal treatment and a wrong marketing strategy.

Under its privatisation plan, the government has so far sold shares in five state entities, raising $1.7 billion. The Privatisation Commission has hired financial advisory consortium for due diligence of 16 state owned enterprises, including PIA, DISCOs and PSM. However, political handling of these transactions was making the issues complicated, said the officials.


Published in The Express Tribune, February 4^th, 2016.