ISLAMABAD According to The News on Friday, Pakistan International Airlines (PIA) requested that the State Bank of Pakistan set up loans from commercial banks totaling Rs15 billion in order to help them deal with the current financial crisis in an SOS (Save Our Ship) letter.
In order to keep the national flag carrier afloat and prevent it from ceasing operations, the Civil Aviation Authority (CAA) has approved a Rs5 billion facility. If not, there are growing chances that its operations may be suspended.
There is still a struggle between two strategies inside the caretaker government’s ranks. While some want the PIA to remain in its current form, which may not be feasible, others want it to be split in two and only privatize the company with a clean balance sheet.
Top official sources confirmed to The News that the finance ministry has declined to offer any assurances in light of the restrictions set by the International Monetary Fund (IMF) and is even asking the SBP to loosen its regulations, which are necessary in order to arrange loans of Rs15 billion.
The economic team has not decided whether or not to provide finance for the PIA, they said, delegating responsibility to other ministries like the Ministry of Privatization, Planning, and Law rather than making a choice themselves.
The finance ministry is hesitant to make any definite decisions and has thus far declined to save the PIA. In an attempt to salvage the situation, the Ministry of Aviation has now been in touch with the Finance Ministry.
The CAA informed the Finance Ministry that the financial institutions were extremely concerned about the growing portfolio of loans they had provided to the PIACL and that they were not currently prepared to make new loan requests, citing a PIA letter dated December 14, 2023.
Even though a technical committee was established with the task of securing Rs15 billion in finance for the cash-sucking PIA by the end of October 2023 in just 48 hours, the financing has not yet been finalized. Even though the term sheet has been signed, the pricing and terms are tight with numerous waivers from the SBP and the Pakistani government.
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It is a known truth that the PIACL has been in a serious financial difficulty and has not been able to make its loan payments on schedule. The banks will be hesitant to lend money to the PIACL if the SBP does not provide PR-8 relaxation with the authority to classify the revenue as regular.
The airlines are already experiencing financial difficulties, and the PIACL’s liquidity crisis would worsen if commercial banks refuse to provide loans. Commercial banks might be permitted to treat suspended income on the past-due amounts of the PIACL as normal income in order to avoid this circumstance.
Now, the CAA has asked the Ministry of Finance to speak with the SBP about allowing PR-8 relaxations to all commercial banks with debts over ninety years.
In addition to boosting financial institutions’ confidence, this action will put them in a better position to meet the Pakistani government’s demand for guaranteed loans.
In response to this scribe’s inquiry for an official version, Ministry of Finance spokeswoman Qamar Abbasi stated, “It is not correct that the MoF has refused any such request.” The State Bank of Pakistan enforces prudential standards. He stated, “Exemptions/relaxations, if any, are also allowed by the SBP.”
Upon being reached, the PIA representative stated that the organization needed to fulfill several important financial responsibilities, such as paying $10.5 million to a lease company for a plane that was parked in Jakarta. Thus, it asked the government for financial assistance.
Therefore, in order to maintain its financial servicing, it asked the government for financial assistance. It is envisaged that the PIA will be able to manage its commitments until a decision is taken by the quarters concerned with certain crucial monies secured on a short-term basis, he said.
