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PIA
PIA
CrisisEconomyHeadlinesPakistan

PIA requests a government loan of Rs15 billion to address a severe liquidity crisis.

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Pakistan International Airlines (PIA) has urgently reached out to the State Bank of Pakistan for a loan of Rs15 billion from commercial banks to address its financial difficulties. The Civil Aviation Authority (CAA) has already provided Rs5 billion to prevent a disruption in PIA’s operations, but there’s a risk of suspension if additional support isn’t secured.

Within the caretaker government, there are conflicting views on whether to privatize a financially stable PIA or proceed with privatization in its current state, a decision yet to be finalized. The Finance Ministry is hesitant to guarantee the loans, considering IMF conditions, and is seeking relaxation of regulations from the State Bank of Pakistan to secure the Rs15 billion loan.

The Finance Ministry’s indecision has prompted the Ministry of Aviation to approach them for a last-ditch effort to relax prudential regulations in favor of commercial banks. Despite efforts to arrange financing within 48 hours by the end of October 2023, no final decision has been reached, and strict terms and pricing in the signed term sheet pose challenges.

PIA is grappling with a severe financial crisis, struggling to meet debt obligations. Without PR-8 relaxation from the State Bank of Pakistan, commercial banks may hesitate to provide loans, exacerbating PIA’s liquidity crisis. The CAA has urged the Finance Ministry to seek PR-8 relaxations for commercial banks, instilling confidence and supporting the government’s guaranteed loan requirement.

In response to inquiries, the Ministry of Finance spokesperson clarified that they have not refused any request, emphasizing that prudential regulations fall under the jurisdiction of the State Bank of Pakistan. The PIA spokesperson highlighted the airline’s urgent financial needs, including payments to a leasing company, and expressed hope for short-term support until a decision is made.

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