ISLAMABAD: Pakistan International Airlines (PIA) finds itself in dire straits as it seeks urgent financial assistance to the tune of Rs15 billion from commercial banks, sending an SOS to the State Bank of Pakistan (SBP).
The Civil Aviation Authority (CAA) has already extended a lifeline of Rs5 billion to prevent a potential suspension of operations, highlighting the severity of the financial crisis.
Within the caretaker government, a debate ensues over the fate of PIA, with two contrasting approaches. One faction advocates for the bifurcation of PIA and the privatization of the entity with a clean balance sheet, while the opposing side leans towards privatizing PIA in its existing form, a prospect that presents its own challenges.
The Ministry of Finance, mindful of International Monetary Fund (IMF) conditions, has been reluctant to offer guarantees for the requested loans. Consequently, the finance ministry is urging the SBP to relax regulations, particularly PR-8, essential for securing the Rs15 billion loans. The decision-making process has witnessed indecision within the economic team, with considerations of involving other ministries such as Privatisation, Planning, and Law, diverting attention from a direct resolution.
Despite the formation of a technical committee tasked with arranging financing for PIA within 48 hours by end-October 2023, the finalization of financing remains elusive. The terms and pricing of the proposed loans involve stringent conditions and numerous waivers from the government of Pakistan and the SBP.
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PIA, grappling with a severe financial crisis, has struggled to meet its debt obligations promptly. The current liquidity crunch faced by the national carrier could worsen if banks refrain from sanctioning the requested loans.
To navigate this financial predicament, the CAA has urged the Ministry of Finance to approach the SBP for relaxations, assuring financial institutions that treating suspended income on overdue amounts as regular income would instill confidence and better position them to support the government’s guaranteed loan requirement.
In response to inquiries, Ministry of Finance spokesperson Qamar Abbasi clarified that the ministry has not rejected any such request, emphasizing that prudential regulations are under the jurisdiction of the SBP, which may grant exemptions or relaxations.
The PIA spokesperson shed light on the critical payments the airline faces, including $10.5 million owed to a leasing company for a parked plane in Jakarta. Acknowledging the financial strain, PIA has sought government support to sustain its financial servicing. While securing critical funds on a short-term basis, PIA aims to manage its obligations until a decisive decision is reached by the relevant authorities.