The International Monetary Fund (IMF) has given its approval for key changes aimed at facilitating the privatization of Pakistan International Airlines (PIA), including the waiver of an 18% sales tax on leased aircraft. This development removes two significant obstacles that had stalled PIA’s privatization efforts.
According to government sources, Deputy Prime Minister Ishaq Dar received a briefing on the PIA sell-off, which is expected to resume following the IMF’s consent to amend the Sales Tax Act and waive the sales tax for investors acquiring or leasing aircraft for PIA. This waiver is seen as crucial for attracting serious bidders and boosting the privatization process of the airline, which is Pakistan’s fourth-largest loss-making entity.
A previous attempt to privatize PIA failed when a real estate developer offered Rs10 billion for a 60% stake, significantly below the minimum sale price of Rs85.03 billion. Major bidders withdrew after the government refused to waive the sales tax and address Rs45 billion in liabilities, which would have turned PIA’s negative equity into a positive one.
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The government had earlier restructured PIA, transferring Rs623 billion in liabilities to a holding company. The IMF’s agreement now allows for further liabilities to be moved into the holding company and clears the way for resuming the sell-off process.
The Privatization Commission had emphasized that 18% sales tax was not applicable in other countries, putting potential PIA investors at a disadvantage. Additionally, the aviation ministry outlined a $500 million business plan to revitalize the airline by adding new aircraft.
As the Privatization Commission gears up to relaunch the PIA sell-off, challenges remain, including how to address Rs45 billion in liabilities. Furthermore, Precision Engineering Complex (PEC), a non-core PIA asset, is set to be sold to the Pakistan Air Force (PAF) for Rs6.5 billion, part of ongoing efforts to clean PIA’s balance sheet.
This progress brings renewed hope for PIA’s privatization, but the final success will depend on overcoming remaining financial hurdles and securing investor interest.
