Pakistan International Airlines (PIA) has urgently appealed to the government for financial assistance, seeking relaxation from the State Bank of Pakistan (SBP) to arrange a loan of Rs15 billion from commercial banks.
Facing operational challenges and potential risks of suspension, the Civil Aviation Authority (CAA) has already granted a Rs5 billion facility to keep the national carrier operational.
According to the news story published in The News, a division exists within the caretaker government on the future of PIA, with one faction proposing bifurcation and privatization of the entity with a clean balance sheet, while the other side supports privatizing it in its existing form, a decision that poses challenges.
The finance ministry, citing IMF conditions, has refrained from providing guarantees and is now urging the SBP to relax regulations to facilitate the arrangement of the Rs15 billion loan.
Top officials confirmed that the economic team is indecisive about arranging financing for PIA, leading to discussions involving other ministries such as Privatization, Planning, and Law.
Refusing to rescue PIA and hesitant to make a firm decision, the finance ministry has been contacted by the Ministry of Aviation to make last-ditch efforts in seeking 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 concerned 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.
Facing a severe financial crisis and delayed debt payments, PIA is dependent on SBP’s PR-8 relaxation to treat income as regular, allowing commercial banks to offer loans.
The CAA has 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, aiming 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, emphasizing 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.
Excellent work done by Govt.
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