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PIA sends SOS to govt for Rs15bn loan amid liquidity crisis

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1 year ago

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  • CAA grants Rs5bn billion facility to keep PIA afloat.
  • Finance ministry refuses to provide any guarantees.
  • Aviation ministry makes last-ditch efforts for relaxation. 

ISLAMABAD: Pakistan International Airlines (PIA) sent an SOS (Save Our Ship) to the State Bank of Pakistan, requesting to arrange Rs15 billion loans from commercial banks to help it deal with the prevailing financial crisis, The News reported Friday. 

The Civil Aviation Authority (CAA) has granted Rs5 billion facility to keep the national flag carrier afloat and avoid halting its operations. Otherwise, there are emerging risks of suspension of its operations.

A tug of war continues as there are two approaches within the ranks of the caretaker government. One side wants to bifurcate the PIA and privatise only the entity having a clean balance sheet while the other side is asking for privatising it in its existing shape which might not be possible.

The finance ministry has refused to provide any guarantees, keeping in view International Monetary Fund (IMF) conditions and is even requesting the SBP to relax its regulation which is required to arrange loans of Rs15 billion, top official sources confirmed to The News. 

“There has been indecision on the part of the economic team as to whether they are ready to arrange financing for the PIA or not, pass the buck to other ministries such as the Ministry of Privatisation, Planning, and Law instead of taking any direct decision,” they added. 

The finance ministry has so far refused to rescue the PIA and is reluctant to take any firm decision. Now the Ministry of Aviation has contacted the Finance Ministry to make last-ditch efforts to seek relaxation of prudential regulation PR-8 in favour of commercial banks.

While referring to a PIA letter written on December 14, 2023, the CAA has conveyed to the Finance Ministry that the financial institutions were seriously concerned about the ballooning portfolio of loans which they had furnished to the PIACL and they were not ready for granting fresh loans at the moment. 

Despite constituting a technical committee which was assigned to arrange financing for the cash-bleeding PIA to the tune of Rs15 billion within just 48 hours by end-October 2023, so far financing has not yet been finalised. Although the signed term sheet has been done, the terms and pricing are not only strict but also involve a lot of waivers from the government of Pakistan and the SBP.

It is a fact that the PIACL has been facing a severe financial crisis and remained unable to pay its debt obligations on time. If the SBP does not grant PR-8 relaxation with the permission to treat the income as regular, the banks will be reluctant to offer loans to the PIACL. 

The airlines are already facing a crunch and the non-sanctioning of loans by commercial banks will further deteriorate the liquidity crunch of the PIACL. To avoid this situation, commercial banks may be allowed to treat suspended income on the overdue amounts of the PIACL as regular income. 

The CAA has now requested the Ministry of Finance to approach the SBP for granting PR-8 relaxations to all commercial banks whose dues are over 90 days along with treating income as regular. This act will not only bring confidence in the financial institutions but also provide a better position to support the Pakistan government’s guaranteed loan requirement.

This scribe sent out a question to Ministry of Finance spokesperson Qamar Abbasi to get an official version and was told that “it is not correct that the MoF has refused any such request. Prudential regulations are enforced by the SBP”. “Exemptions/relaxations, if any, are also allowed by the SBP,” he concluded.

When the PIA spokesperson was contacted, he said the PIA was required to make some critical payments including $10.5 million to a leasing company on account of a parked plane in Jakarta as well as some other financial obligations. So it requested the government to provide financial support to keep its financial servicing afloat. With some critical funds obtained on a short-term basis, it is hoped that the PIA would be able to manage its obligations till a decision is made by the quarters concerned, he concluded.

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The total amount of Pakistan’s liquid foreign reserves is $15.95 billion.

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As of February 14, Pakistan’s total liquid foreign reserves were $15,947.9 million, with the State Bank of Pakistan’s (SBP) holdings being $11,201.5 million.

Official figures for the week ending February 14, 2025, show that the central bank’s liquid foreign exchange reserves rose by $35 million to $11,201.5 million.

Commercial banks maintained net foreign reserves of $4,746.4 million during the period under review, according to the breakdown of foreign reserves.

The nation’s total liquid foreign reserves as of the week ending February 07, 2025, were $15,862.6 million.

Of these, the central bank held $11,166.6 million in foreign reserves, while commercial banks kept $4,696 million in net reserves.

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In January 2025, RDA inflows reach 9.564 billion USD.

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Remittances under the Roshan Digital Account (RDA) increased from US $9.342 billion at the end of 2024 to US $9.564 billion by the end of January 2025.

The most recent data issued by the State Bank of Pakistan (SBP) revealed that remittance inflows in January totaled US$222 million, compared to US$203 million in December and US$186 million in November 2024.

Millions of Non-Resident Pakistanis (NRPs), including those who own a Non-Resident Pakistan Origin Card (POC), desire to engage in banking, payment, and investing activities in Pakistan using these accounts, which offer cutting-edge banking options.

Nearly 778,697 accounts were registered under the scheme by the end of January 2025, according to the data.

By the end of January, foreign-born Pakistanis had contributed US $59 million to Roshan Equity Investment, US $479 million to Naya Pakistan Certificates, and US $799 to Naya Pakistan Islamic Certificates.

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FBR lowers Karachi’s built-up structure property valuation rates

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2 weeks ago

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A year-by-year breakdown of the depreciation value of residential and commercial built-up properties is included in the updated property valuation rates for Karachi that the FBR has announced.

The notification said that built-up structural values on residential property will be gradually reduced.

A residential home’s built-up structure, which is five to ten years old, will lose five percent of its worth.

In a similar vein, constructions between the ages of 10 and 15 will lose 7.5% of their value, while those between the ages of 15 and 25 would lose 10%. Built-up structures that are more than 25 years old will be valued similarly to an open plot.

Furthermore, age will also be used to lower the valuation of built-up properties, such as apartments and flats.

Structures that are five to ten years old will depreciate by ten percent, while those that are ten to twenty years old will depreciate by twenty percent. A 30% depreciation will be applied to properties that are 20 to 30 years old, while a 50% reduction will be applied to those that are above 30 years old.

In terms of commercial built-up properties, buildings that are 10 to 15 years old will lose 5% of their value, while those that are 15 to 25 years old will lose 8%. The value of properties that are more than 25 years old will drop by 10%.

In contrast, there would be a 15% boost in the value of commercial properties in the Defence Housing Authority (DHA) that face any Khayaban.

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