PIA in trouble again; Finance Ministry hesitant to assist

ISLAMABAD: The Pakistan International Airlines (PIA) has issued an urgent appeal, commonly known as an SOS (Save Our Ship), to the State Bank of Pakistan (SBP).

The plea seeks financial assistance to the tune of Rs 15 billion from commercial banks to navigate through the ongoing financial turmoil, The News reported on Friday.

The Civil Aviation Authority (CAA) has stepped in by extending a financial lifeline of Rs 5 billion to prevent the national flag carrier from sinking and to avert the looming threat of operational suspension. However, the precarious situation has sparked a tug of war within the caretaker government, with conflicting views on the future course of action for PIA.

What will be the new petrol price in Pakistan on January 1st?

Internally, the government is divided into two camps. One faction advocates the separation of PIA into distinct entities, with the financially stable portion being privatised. Conversely, the opposing faction insists on the privatisation of PIA in its current form, a proposition deemed challenging.

Official sources, privy to the matter, disclosed that the finance ministry remains reluctant to furnish guarantees due to stipulations set by the International Monetary Fund (IMF). Furthermore, the ministry is actively urging the State Bank of Pakistan to ease its regulations, a necessary step to secure the requested Rs 15 billion loans.

Reportedly, a state of indecision within the economic team also exists, which is contemplating whether to provide financial aid directly or delegate the responsibility to other ministries such as Privatisation, Planning, and Law. The finance ministry, at present, refrains from committing to a definitive course of action.

Following a written appeal dated December 14, 2023, the CAA has conveyed the concerns of financial institutions to the Finance Ministry. These institutions express apprehension about the expanding loan portfolio with PIA and are hesitant to extend additional loans.

Despite the establishment of a technical committee mandated to secure financing of Rs 15 billion within 48 hours by the end of October 2023, no concrete progress has materialised. The terms and conditions of the proposed financing, outlined in a signed term sheet, are stringent and involve several waivers from the government and the State Bank of Pakistan.

NOC withdrawn for Shaukat Khanum Hospital’s fundraising event

The Ministry of Aviation has now engaged the Finance Ministry in a last-ditch effort to relax prudential regulation PR-8, particularly concerning commercial banks.

Responding to the crisis, the CAA has formally requested the Ministry of Finance to approach the SBP for PR-8 relaxations for commercial banks with dues exceeding 90 days. Such concessions, treating overdue income as regular, are seen as crucial to instill confidence in financial institutions and bolster support for the government’s guaranteed loan requirements.