Pakistan to privatise flag carrier, outsource Islamabad airport by November: Finance Minister

In an interview with AFP back in April, Aurangzeb had expressed hope that the privatisation of the state-owned Pakistan International Airlines (PIA) could be completed by June 2024. However, speaking on Wednesday, he attributed the five-month delay to two key factors: ensuring macroeconomic stability and conducting thorough due diligence on potential buyers.

“The reality is, when any foreign or local investor is going to invest a substantial amount of money, they want to be sure the foundation is solid,” Aurangzeb said, referring to the importance of macroeconomic conditions.

Aurangzeb also said that interested parties for both PIA and Islamabad airport require scrutiny, which contributed to the delay. “Ultimately, it’s the cabinet that approved the extension in the timelines to allow people to carry out due diligence before making their submissions,” he added.

The finance minister said Pakistan had previously lagged behind on profit and dividend repayments but had made significant progress towards macroeconomic stability since the current government took office.

Last year, the country was on the verge of default, as its economy contracted due to political turmoil, devastating monsoon floods, and decades of economic mismanagement, all exacerbated by a global economic downturn. Inflation hit a peak of 38%, but has since fallen to under 7%, largely due to the central bank’s high interest rates and other government measures, including import restrictions to conserve foreign exchange reserves.

Last month, the IMF approved a $7 billion loan for Pakistan, marking the country’s 24th loan from the multilateral lender since 1958.

Aurangzeb also pointed to improvements in Pakistan’s current account deficit and the stabilisation of the Pakistani rupee, which has lost around 65% of its value against the US dollar since 2020. He noted that in May and June, Pakistan repaid over $2 billion to existing international investors.

Pakistan’s gross public debt currently stands at 69% of GDP, approximately $258 billion, according to the IMF. The IMF deal includes conditions such as privatising state-owned enterprises, increasing the tax base, and reforming the power sector.

Aurangzeb highlighted a common theme across all three of these issues. “Tax, power, SOEs: there’s leakage, there’s theft, there’s corruption. And we need to tackle that,” he said.

However, he dismissed media reports suggesting the government wasn’t serious about broadening its tax base, pointing out that tax revenues had increased by 29% in the last fiscal year, and were expected to rise by a further 40% this year.

In a country of over 240 million people, where most employment is in the informal sector, only 5.2 million people filed income tax returns in 2022. Aurangzeb said it was essential that more people contribute to the tax system. “We’ve reached a saturation point with those who are paying taxes, and this cannot continue.”

The government is also focused on improving tax collection in sectors like real estate, retail, retail distributors, and agriculture.