Islamabad switches gears, focuses on privatising Discos instead of PIA

In November 2024, Islamabad failed to sell the national flag carrier to private entities, receiving only a measly 10 billion rupees from the owner of Blue World City – A real estate developer. According to reports, Islamabad has decided to momentarily shift the privatisation process of Pakistan International Airlines (PIA) to the second phase.

The reasoning behind this move is to allow lawmakers and authorities to concentrate on the privatisation efforts surrounding power distribution companies (Discos). Reports reveal that Islamabad’s top priority is to sell off Discos despite analysts claiming that the government should take some time to oversee relevant actions to prepare for the process.

Pakistan’s consideration of privatising Discos was discussed by domestic authorities with a World Bank (WB) delegation that is currently visiting the cash-strapped country. Reports revealed that the WB delegation comprises a team of executive directors who are in town to go over economic reforms which Islamabad plans to enact.

The privatisation efforts are part of these reforms and fall under the umbrella of the Country Partnership Framework (CPF). The CPF was inked last month, unlocking a staggering $20 billion in indicative assistance from the WB.

As per data from reports, the WB has divided this loan amount into two parts for Pakistan. Under the CPF, $14 billion will be provided in ‘concessional loans’ and will have advantageous terms for Pakistan. The rest of the loan, amounting to $6 billion, will be given to Pakistan at higher interest rates.

Both the WB and Pakistan are expected to engage with each other in implementation workshops, as active collaboration could allow for the CPF to mature and meet its objectives successfully.

After temporarily sidelining PIA’s privatisation efforts to the second phase, policymakers have moved Disco privatization up to phase one of the plan. The Minister for Economic Affairs, Ahad Khan Cheema, reportedly revealed to the visiting WB team that other State-Owned Entities (SOEs) will also be privatised in phase two.

Privatisation has historically been viewed as a negative activity by the general public. However, these loss-making institutions are the root cause of the excessive taxes that citizens must bear to keep public industries up and running.

If the taxes from Pakistanis are not enough, the government has to borrow funds to finance these industries to keep them operational. Ultimately, the burden of the interest falls upon citizens once again once the loans reach maturity.

Ahad Khan outlined how about a third of the SOEs were ‘strategic’ assets, with the remaining assets being available to be put up on the auction block. As per reports, the minister conveyed to the WB delegation about Islamabad’s aims to privatize upwards of 50 SOEs within three to four years.