Govt not financing purchase of new PIA aircraft, says finance adviser

Adviser to the Finance Minister, Khurram Schehzad, clarified on Sunday that the government was not financing the purchase of any aircraft for Pakistan International Airlines (PIA) after its privatisation and had not issued any sovereign guarantee for loans to fund the airline’s fleet expansion.

The clarification came in the backdrop of a recent meeting held between Finance Minister Muhammad Aurangzeb and Chair of the US Export-Import (Exim) Bank John Jovanovich on the sidelines of the 81st session of the United Nations General Assembly in New York on September 25, in which Aurangzeb held discussions seeking financing opportunities for procurement of aircraft for PIA.

Read: Aurangzeb seeks US financing for PIA

In a post on X, Schehzad said that "certain circulating comments" had failed to accurately grasp the roles of privatisation and the export credit agency.

"The government is neither purchasing aircraft for PIA after privatisation nor has any announcement been made of a government guarantee or loan funded by taxpayers' money for that purpose," Schehzad remarked.

He noted that the primary objective of the US Exim Bank was to promote US exports and employment. "Boeing aircraft are US exports. Therefore, the US Export-Import Bank provides financial assistance to foreign buyers purchasing US-made aircraft, including airlines, under established financial mechanisms".

Schehzad said the US agency’s framework allowed for asset-backed aircraft financing, under which the aircraft itself could serve as security, while the creditworthiness of the airline, lessee or any guarantor could also be assessed.

“A government guarantee is not a mandatory condition,” he said.

Schehzad said the government’s involvement was limited to facilitating access to international financing, technology and suppliers, as well as promoting commercial opportunities for Pakistani businesses.

He added that the finance minister’s discussions with US Exim Bank were broader than PIA and included potential financing in areas such as aviation, refinery expansion and the Reko Diq project.

The adviser also rejected suggestions that the proposed aircraft financing would create a "hidden subsidy" or transfer PIA’s commercial risks to taxpayers. "Therefore, claims such as "public debt," "hidden subsidy," "state financial backing," or taxpayers bearing PIA's commercial risk should not be presented as facts, as no such arrangement has been announced".

Read More: Arif Habib Consortium takes over PIA management as govt formally completes privatisation process

He said no government borrowing for PIA or sovereign guarantee had been announced and that references to potential US Exim financing should not be treated as confirmation of a state-backed loan. "No announcement has been made by the Government of Pakistan to take out a loan for PIA or issue any government guarantee".

Schehzad stated that PIA was privatised following an auction in December last year, with the transaction aimed at transferring ownership and commercial management of the national flag carrier to the private sector.

"Privatisation means the transfer of ownership, commercial management and operations. It does not mean that the Government of Pakistan abandons its role in creating opportunities for Pakistani companies and opening international doors," he said.