Taxpayers to Bear Rs. 30 Billion Interest on PIA’s Legacy Debt

Pakistan's taxpayers are anticipated to pay approximately Rs. 30 billion in annual interest on the legacy debt of Pakistan International Airlines (PIA) for the current fiscal year, despite the airline having been privatized. Following the privatization, the government has set aside Rs. 73 billion under a contingency plan for privatization, which covers interest payments on Rs.

268.5 billion of PIA debt transferred to the PIA Holding Company. This annual interest cost is three times the Rs. 10 billion cash received by the government from the sale of a 75 percent stake in PIA. The successful bidder for a 25 percent stake offered Rs. 135 billion, with Rs. 125 billion to be reinvested in PIA, and the government receiving Rs.

10 billion in cash. In 2024, PIA's debt was restructured, extending repayment to 10 years at a 12 percent interest rate. Consequently, the government must allocate funds annually for interest payments. The banks will receive around Rs. 573 billion, including more than Rs. 300 billion in interest, over the 10-year period. The Finance Ministry introduced a Rs.

73 billion contingency provision to address liabilities from privatization or winding down of public sector entities, which could also be utilized for other legacy debts, such as those of the Pakistan Agriculture Storage and Services Corporation. The government has also extended sales tax exemptions to all domestic airlines from fiscal years 2027 to 2028 due to concerns over PIA's new owners receiving preferential tax treatment.