Pakistan’s economic managers have voiced concern over alleged violation of the terms of a loan acquired by Pakistan International Airlines (PIA) to address the financial challenges faced by Roosevelt Hotel, New York, which is owned by the airline.
Sources told The Express Tribune that the matter was taken up during a recent meeting of the Economic Coordination Committee (ECC) of the cabinet, where it was highlighted that PIA had allegedly flouted the terms of a loan agreement reached with the National Bank of Pakistan (NBP).
During discussion, the arrangement made with the bank regarding the loan, which was endorsed by the Finance Division, and the bank’s concern over PIA’s failure to meet its commitment were considered.
The ECC showed its concern about the violation of loan terms. It also discussed the litigation initiated by the labour union and its impact.
The economic decision-making body gave directives that PIA Investment Limited, the holding company of PIA, should immediately comply with the loan terms including the conditions related to the “lock box”.
It was further directed that PIA would submit to the ECC its financial projections for the remaining loan period based on its estimated income and expenditure through the Aviation Division.
The Aviation Division, while briefing the ECC about the case, informed meeting participants that the Finance Division had arranged $142 million by acquiring a loan from the NBP.
Thereafter, the ECC, while considering the case on August 31, 2021, allowed the utilisation of $10 million out of the $18 million allocated for pension fund withdrawal to avoid penal action against Roosevelt Hotel by the local authorities.
PIA management told the committee that until now Roosevelt Hotel had utilised $134 million out of the loan amount.
The balance of $8 million was still available with the bank. The need for settling pension fund withdrawal liabilities had arisen due to the closure of the hotel in December 2000.
However, the hotel was reopened for business in May 2023 with the approval of the cabinet. The pension liability has now been deferred post-settlement agreement dated May 10, 2023 between Roosevelt Hotel and the employees union.
Therefore, PIA Investment Limited requested for diverting the unutilised amount of $8 million to pay for severance and other pressing operational expenses.
The ECC was informed that the Finance Division while giving its views had stated that the earlier allocation of $10 million from the pension fund liabilities had been approved. Therefore, the ECC’s nod may be obtained in that case.
The Aviation Division requested the ECC that PIA Investment Limited should be allowed to utilise the requested $8 million from the pension fund liabilities lying with the NBP to meet severance and other pressing operational expenses of Roosevelt Hotel.
The ECC considered the summary titled “Financial challenges of Roosevelt Hotel, New York – request for GOP support”, submitted by the Aviation Division, and approved the proposal.
Published in The Express Tribune, June 8th, 2024.
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