Govt scrambles to get Rs8bn loan guarantees for PIA

ISLAMABAD: In the midst of decline in revenues by 70 percent owing to cancellation of over 600 PIA flights, the Ministry of Finance has been working to find space for Rs8 billion loan guarantees to stay within the agreed limits of the IMF.

Top official sources told The News on Sunday that PIA had witnessed a massive decline of 60 to 70 percent in revenue on daily basis; it used to generate Rs700 to Rs800 million revenue. This has now declined to Rs300 million. There are a total of 34 aircraft in the fleet of PIA out of which two planes are not able to operate owing to different reasons.

Now PIA does not have the money to meet fuel requirements. Because of cancellation of flights, the airline is announcing only those flights for which it procured fuel to ensure their operation.

Last week, the ECC had approved a bridge financing of Rs8 billion through CAA resources that would be used for payment of $25 million liabilities owed to Malaysia for procurement of two aircraft. There was an outstanding amount of $30 million but after tough negotiations, PIA convinced them over payment of $25 million.

PIA had sought Rs24.6 billion for its operational expenses from the government of Pakistan. The Ministry of Finance had initially rejected the demand for this injection on the basis that in the past, PIA came up with financial injections with the commitment to undertake restructuring plan but it was never implemented.

The Privatization Commission is making all out efforts to accomplish all required procedures for going ahead with privatisation till December or January. It is yet to be seen how speedily they would be able to accomplish all the spadework and procedures without compromising the objective of transparency.

It would be an uphill task for accomplishing the PIA transaction but also keeping its operation intact. If it reached to point of shut down in its existing shape, its privatization will not produce desired results.

The Ministry of Finance has been working for creating a fiscal space and would provide its nod in the shape of guarantees for generating loans of Rs8 billion.

“We might be able to jack up all financial injections up to Rs15 billion but it’s too early to share precise numbers,” said one top official and added that the outcome of the ongoing exercise would be determined this week. Total guarantees limit for PIA stood at Rs262 billion, which were exhausted but later on the airline paid back its outstanding loans. So there was room available to the tune of Rs8 billion at the moment.

There is no easy solution for cash bleeding PIA in sight but it should be privatised in a manner that it remains afloat for the next three to six months.