ISLAMABAD/DOHA (The Thursday Times) — The State of Qatar has shown interest in acquiring a substantial portion of Pakistan International Airlines (PIA) for over $2 billion. This potential acquisition is a pivotal part of Pakistan’s larger economic reform and privatisation agenda, driven by the need to meet targets set by the International Monetary Fund (IMF) and alleviate financial burdens from loss-making state enterprises.
The Privatisation Commission Board (PCB) of Pakistan’s Ministry of Privatisation, following a crucial meeting in Islamabad on November 10, 2023, designated a consortium led by Ernst & Young (EY) as the financial advisor for this significant privatisation effort. EY, with a global presence and a base in Karachi, is entrusted with structuring the transaction for the sale of 40% of PIA.
The decision to engage EY highlights the government’s commitment to a transparent and structured privatisation process. Prior to this appointment, Pakistan’s Privatisation Minister Fawad Hasan Fawad had noted that several prominent groups, including Rothschild & Co and Houlihan Lokey, had expressed interest in this advisory role.
Qatar’s interest in PIA is particularly strategic, given the airline’s established direct routes to key global destinations including Europe, the UK, the US, and Canada. This acquisition would not only provide Qatar with a significant foothold in South Asia’s aviation market but also enhance its global connectivity.
The move to privatise PIA is part of Pakistan’s broader economic strategy, which includes legislative amendments allowing for partial privatisation and the establishment of public-private partnerships. This strategy is closely linked to Pakistan’s engagements with the IMF, under which the country is undergoing significant economic reforms.
Recently, the IMF announced a staff-level agreement with Pakistan, a part of the country’s Stand-By Arrangement (SBA). This agreement, awaiting approval from the IMF Executive Board, is set to unlock approximately US$700 million, contributing to a larger US$3 billion SBA. Nathan Porter, leading the IMF team, highlighted Pakistan’s nascent economic recovery, emphasising the importance of fiscal consolidation, enhancing social safety nets, and addressing challenges in the energy sector.
The privatisation of PIA, including its associated assets like the iconic Roosevelt Hotel in New York, aligns with Pakistan’s efforts to stabilise its economy by divesting from non-core assets and focusing on fiscal consolidation. The country has been dealing with significant losses in its state-owned enterprises, necessitating a shift towards more commercially oriented and efficient management. However, a potential deal with Qatar would not include a purchase of the Roosevelt Hotel from the Government of Pakistan.
The interim federal government of Pakistan has expressed confidence in advancing PIA’s privatisation by early 2024, with the Qatar deal being a centerpiece of this initiative.