World News | Pakistan International Airlines Debt Now Rests on Taxpayers Shoulders
Get latest articles and stories on World at LatestLY. Islamabad: The government and banks have decided on a plan to restructure PIA's debt, totalling Rs268 billion. The Ministry of Finance, which initially didn't want to include PIA's debt in the overall public debt, has changed its mind. Now, they agreed to use the budget to pay both the principal amount and interest on the debt.
Islamabad [Pakistan], February 2 (ANI): Pakistan's caretaker government and banks have agreed on a plan to restructure the debt of troubled Pakistan International Airlines (PIA).
Under the budget agreement, the government will utilize proceeds from the sale of PIA for principal payments. In return, banks will accept a 10-year debt rollover with a 12 per cent annual interest rate, resulting in Pakistan rupees (PKR) 32.2 billion in annual interest payments as reported by the Express Tribune in Pakistan.
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This means banks will receive PKR 322 billion in interest payments over a decade, surpassing their outstanding stocks of PKR 268 billion. Sources state the total payout to banks at a 12 per cent interest rate will be PKR 572 billion in 10 years.
The Ministry of Finance will look for the endorsement of the International Monetary Fund. According to the sources, banks will seek approval from their respective board of directors.
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In March 2023, the Pakistan finance ministry ceased interest payments on the PIA debt, prompting the government and PIA management to consider privatization. However, concerns remain that the banks' debt restructuring alone might delay privatization. The agreed restructuring and transfer of PIA debt ownership by the finance ministry eased the airline's primary concern, eliminating its largest monthly charge from the balance sheet.
Privatisation Minister Fawad Hasan Fawad remained firm in his demand to make PIA debt part of public debt. Finance Secretary, Imdad Ullah Bosal, and Finance Minister Dr Shamshad Akhtar finally agreed to the proposal with some warning signals, the Express Tribune reported.
According to the sources, the finance ministry, the privatization ministry including the representatives of nine commercial banks, a total debt of PKR 268 billion debt, including PKR 250 billion principal, is being rearranged for 10 years. The government decided to pay back the debt annually at 12 per cent
PIA's total outstanding debt stands at PKR 825 billion. The privatization ministry and PIA must secure no objection certificates from the Civil Aviation Authority and Federal Board of Revenue to file a scheme of arrangement with the Securities and Exchange Commission of Pakistan (SECP), Express Tribune reported.
The Interim Finance minister had earlier stated that PIA's PKR 825 billion debt would be transferred to a holding company. "I do not know what to do with this debt," remarked the finance minister while speaking at a seminar on the economic issues of the country.
The banks have agreed to provide an NOC to SECP to transfer their PKR 268 billion debt to the holding company and surrender their claim on PIA's assets. (ANI)
(The above story is verified and authored by ANI staff, ANI is South Asia's leading multimedia news agency with over 100 bureaus in India, South Asia and across the globe. ANI brings the latest news on Politics and Current Affairs in India & around the World, Sports, Health, Fitness, Entertainment, & News. The views appearing in the above post do not reflect the opinions of LatestLY)