Pakistan Appoints ‘Ernst & Young’ for PIA’s privatization

In accordance with International Monetary Fund (IMF) conditions advocating the privatization of state-owned entities, Pakistan has chosen the British multinational firm ‘Ernst & Young’ as the Financial Advisor for the privatization of its national flag carrier, Pakistan International Airlines (PIA).

The decision was made by the country’s privatization commission board on Friday, marking a significant step in the divestment of this financially struggling Airlines.

Following the submission of proposals by eight parties for a Financial Advisor for PIACL privatization, the Privatization Board’s evaluation committee ranked the “Consortium led by Ernst & Young” as the top contender based on specified criteria. Subsequently, a negotiating committee has been established by the board to finalize the financial services agreement with the selected bidder.

Under the directive of caretaker Prime Minister Anwaarul Haq Kakar to expedite the privatization of PIA, tangible progress has been observed. The Economic Coordination Committee (ECC), chaired by Finance Minister Dr. Shamshad Akhtar, recently approved a US$28 million bridge financing package for PIA. This funding, sourced from the Civil Aviation Authority (CAA), aims to settle overdue payments and address the pressing needs of the airline. Notably, a prior bilateral arrangement between CAA and PIA had been sanctioned by the ECC.

World Bank and Privatization

Discussions between the World Bank and Pakistan are underway. They focus on a comprehensive privatization agenda that includes entities like PIA and state-run power distribution companies.

The government is considering the privatization of power generation and distribution companies. Alternatively, it may transfer their management control to private entities for a period of 20 to 25 years.

This strategic shift is prompted by the power sector’s circular debt, exceeding US$8 billion and posing a threat to sustainability. It signifies a deliberate distancing of the government from direct business operations in response to pressing issues.

To address the US$2.5 billion annual losses incurred by power distribution companies, Pakistan is actively exploring a potential long-term concession model with the International Finance Corporation (IFC). The collaboration aims to involve the private sector, reduce losses, and enhance overall performance.