Pakistan's Financial Challenges and Privatization

 

Caretaker Federal Minister Fawad Hassan Fawad

The caretaker government of Pakistan made a significant announcement on Tuesday, categorizing Pakistan Steel Mills (PSM) as a defunct asset. Additionally, it highlighted the dire financial situation of Pakistan International Airlines (PIA), revealing staggering losses amounting to Rs13 billion per month and Rs50 million per day. The losses incurred by power distribution companies have also soared, surpassing a colossal sum of Rs600 billion.

Interim Privatization Minister Fawad Hassan Fawad, speaking at a press conference in Islamabad alongside Caretaker Information Minister Murtaza Solangi, emphasized the critical state of government-owned enterprises. According to Fawad, between 2018 and 2019, a substantial amount of Rs2,542 billion was spent on these entities. By 2020, the losses incurred by these enterprises equated to 7% of the country's GDP. Notably, 15 major institutions, including PIA and PSM, were burdened with a debt of Rs2,665 billion.

Fawad revealed alarming statistics about PIA, stating that out of its 34 planes, 15 were grounded. This situation has led to a monthly loss of Rs12.77 billion and a daily loss of Rs50 million. The national airline has suffered a staggering loss of over $7 billion since 2012, with its total losses reaching Rs713 billion by June 2023.

Highlighting the financial support extended by the government, Fawad disclosed that Rs2.542 trillion was allocated to aid struggling State-Owned Enterprises (SOEs) between 2018 and 2022. He stressed that these funds could have been directed towards vital national development projects, such as the Bhasha Dam. The accumulated losses of PIA by the end of June 2023 amounted to Rs713 billion, with Rs263 billion constituting debt, in addition to an extra Rs13 billion provided by banks under government guarantee. Moreover, the government allocated Rs150 billion from its own resources.

Fawad also pointed out that government institutions received grants totaling Rs1,125 billion over four years. Additionally, he mentioned that the monthly cost of six leased planes stood at $2 million, and bonds worth Rs779 billion were issued for various government institutions.

In light of these staggering financial challenges, the government is considering the privatization of PIA as a solution. This move aims not only to prevent further losses to the national exchequer, amounting to Rs12.70 billion per month, but also to maximize the value of the airline. The Privatization Commission has recommended appointing a single transaction adviser, a proposal that is pending approval from the federal cabinet based on a report prepared in 2017.

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