Pakistan International AIrlines
Getting your Trinity Audio player ready...

PIA financial crisis- Pakistan International Airlines (PIA) has urgently sought financial assistance and government support, appealing for relaxation from the State Bank of Pakistan (SBP) to secure a Rs15bn loan from commercial banks.

In the face of operational challenges and potential risks of suspension, the Civil Aviation Authority (CAA) has already provided a Rs5 billion facility to maintain the operational status of the national carrier.

As reported by The News, a division exists within the caretaker government regarding the future of PIA. One faction proposes bifurcation and privatization of the entity with a clean balance sheet, while the other side supports privatizing it in its existing form, a decision posing various challenges.

Citing IMF conditions, the finance ministry refrains from providing guarantees and is now urging the SBP to relax regulations to facilitate the arrangement of the Rs15bn loan.

Top officials have confirmed the economic team’s indecision about arranging financing for PIA, leading to discussions involving other ministries such as Privatization, Planning, and Law.

Read Also: Cabinet’s Decision on Ordinance Opens Doors for Privatizing Government Assets, with PIA in the Mix”

The finance ministry, hesitant to rescue PIA and reluctant to make a firm decision, has been contacted by the Ministry of Aviation to make last-ditch efforts in seeking the relaxation of prudential regulation PR-8 in favor of commercial banks.

According to a PIA letter dated December 14, 2023, conveyed by the CAA to the Finance Ministry, financial institutions are expressing concerns about the growing portfolio of loans to PIA.

Despite efforts to arrange financing within 48 hours by the end of October 2023, a signed term sheet is in place, but the terms and pricing are stringent, requiring waivers from the government of Pakistan and the SBP.

Faced with a severe financial crisis and delayed debt payments, PIA is reliant on SBP’s PR-8 relaxation to treat income as regular, enabling commercial banks to offer loans.

The CAA has formally requested the Ministry of Finance to approach the SBP for PR-8 relaxations for commercial banks with dues over 90 days and to treat income as regular. This aims to boost confidence in financial institutions and better support the government-guaranteed loan requirement.

In response to inquiries, the Ministry of Finance spokesperson, Qamar Abbasi, clarified that the ministry has not refused any request. He emphasized that prudential regulations are enforced by the SBP, and exemptions or relaxations are allowed by the SBP.

The PIA spokesperson highlighted critical payments, including $10.5 million to a leasing company, and other financial obligations. The appeal to the government is for immediate financial support to ensure continued financial servicing, with the hope of managing obligations until a decision is made by the relevant authorities.

By Author

Leave a Reply

Your email address will not be published. Required fields are marked *