Pakistan to finalize privatization of PIA and Islamabad Airport by November

Finance Minister Mohammad Aurangzeb has declared that the two significant projects of privatizing PIA and Islamabad International Airport will be finalized by November. This decision was reached following a break that was implemented with the objective of ensuring that bids from potential private parties are adequately protected. The government has been under pressure to revive PIA, an organization that has been inactive for billions of losses.

Aurangzeb expressed his optimism that the privatization could be completed by June 2024, which is within the next two years, in the previous interview. Nevertheless, in a more recent interview on October 23^rd, 2024, he clarified that the five-month postponement was a result of two primary factors: the necessity of conducting thorough research on potential participants and the significance of macroeconomic stability.

“The reality is, when any foreign investor comes in, or even the local investor, who is going to put in a substantial amount of money, they want to ensure that the foundation is there,” he underscored, highlighting the importance of the macroeconomic environment. Additionally, Aurangzeb stated that the postponement was also caused by issues with the potential bidders for the Islamabad airport and the PIA.

“Therefore it’s ultimately the cabinet which approved the extension in the timelines so people can do their due diligence before they make these submissions,” he stated. Aurangzeb also noted that Pakistan was in arrears on existing profit and dividend commitments when the current government assumed power; however, the country has since made progress in terms of macroeconomic stability.

The country was on the verge of a default last year due to a decline in its economy, political instability, the most severe monsoon floods in 2022, years of mismanagement, and a global recession. Inflation rose to 38 percent, but it has since decreased to below seven percent as a result of the central bank’s high interest rates and government measures, such as the import prohibition, to preserve foreign exchange.

The IMF approved a $7 billion loan, marking Pakistan’s 24th payout from the multilateral lender since 1958. Aurangzeb also observed improvements in the current account deficit of the country and the stabilization of the Pakistani rupee, which has declined by 65 percent against the US dollar since 2020.

“In May and June on the back of this macroeconomic stability and building up on our reserves, we paid more than $2 billion to our existing international investors,” he said.The aggregate public debt of Pakistan is currently $258 billion, or 69 percent of the GDP. The IMF agreement encompasses a broader tax base and a greater expansion of the power sector, in addition to the sale of SOEs.

Aurangzeb observed that a consistent pattern exists among all of these critical issues. “Tax, power, SOE: There’s leakage, there’s theft, there’s corruption, right? And we have to deal with all of that.”

He dismissed certain media reports that the government was not sincere in its efforts to broaden its tax base, noting that tax revenues have increased by 29% in the previous fiscal year and are expected to increase by 40% this one.

In 2022, only 5.2 million individuals lodged their income tax returns in a nation with a population exceeding 240 million, a significant number of whom are employed in the informal sector.  “People who are not paying up, they need to start paying for the simple reason that we have reached a saturation point of the people who are paying,” he emphasized.

“The salaried class, the manufacturing industry, reached a saturation point. And this cannot go forward,” he added.

Aurangzeb reiterated the government’s commitment to enhancing the tax system in various sectors of the country, with a particular focus on agriculture, real estate, retail, and distributors.