ISLAMABAD: Pakistan has informed the International Monetary Fund (IMF) of its plans to privatize at least seven state-owned enterprises (SOEs), including Pakistan International Airlines (PIA), as part of efforts to complete the $7 billion loan program.
PIA’s Privatization and Roosevelt Hotel’s Uncertain Fate
The government has committed to selling PIA by July, according to a report by The Express Tribune. However, the future of PIA-owned Roosevelt Hotel in New York remains uncertain following the U.S. government’s decision to terminate its $228 million lease agreement early.
Pakistan had finalized a three-year, $7 billion IMF aid package in July, aimed at restoring macroeconomic stability and fostering sustainable growth. The Extended Fund Facility (EFF) spans 37 months and includes six performance reviews, with the next $1 billion loan tranche contingent on a successful upcoming review.
To generate funds and reform loss-making SOEs, Pakistan is looking to sell between 51% and 100% of PIA’s shares. Currently, 96% of PIA is government-owned.
PIA Attracts Interest from Bidders
Last year, a Pakistani overseas group offered Rs100 billion for PIA after the government received just a Rs10 billion bid against its Rs85 billion valuation from Blue World City Consortium.
A competing Al-Nihang Group has proposed acquiring PIA for Rs100 billion, with conditions including:
- Assumption of PIA’s existing Rs250 billion liabilities
- Full settlement of all outstanding obligations
Privatization of Other Entities
Officials briefed the IMF that Pakistan aims to privatize five to seven SOEs, including:
- PIA
- Three financial institutions
- Three power distribution companies
Among the financial institutions up for privatization is Zarai Taraqiati Bank Limited (ZTBL), with hopes of completing the transaction by November.
Roosevelt Hotel: Sale or Lease?
The Cabinet Committee on Privatization (CCoP) has yet to decide the future of the Roosevelt Hotel, a prime real estate asset in New York. The government is weighing options:
- Selling it outright
- Entering a joint lease agreement
The 1,025-room hotel was leased to the Immigrant Housing Business under New York City Government for three years starting July 2023. However, the city recently issued a termination notice effective July 2024, one year earlier than planned. This could result in an $80 million revenue loss, as the lease rate was $210 per room in the third year.
The government has indicated that three potential bidders might participate in Roosevelt’s privatization. Two of these bidders had previously withdrawn due to:
- The government’s refusal to waive an 18% sales tax on aircraft leases
- Rs45 billion in liabilities remaining on PIA’s balance sheet
Privatization of Power Distribution Companies
Pakistan also plans to sell three power distribution companies—Faisalabad, Islamabad, and Gujranwala—by December. The decision to sell them collectively or individually will be based on recommendations from financial advisers.
UAE’s Interest in First Women Bank Limited
The United Arab Emirates (UAE) has expressed interest in acquiring First Women Bank Limited as a full-fledged commercial bank, with a potential deal expected by May. However, the UAE prefers a government-to-government transaction over open bidding.
Next Steps in Privatization
- ZTBL’s privatization process is underway, with financial advisers being hired to facilitate the sale.
- House Building Finance Company is expected to be sold next month.
Pakistan’s push for privatization is a key requirement under the IMF program, with the goal of stabilizing the economy and reducing fiscal burdens from loss-making SOEs.
