Pakistan's current caretaker government is looking increasingly unlikely to lock in the privatisation of PIA - Pakistan International Airlines (PK, Islamabad International) before the February 8, 2024, election. Multiple issues remain unresolved, key among them an agreement between the government and lenders on interest rates.

Domestic banks want to charge a fixed annual interest rate of 16.6% per annum on existing loans to the state-owned airline totalling PKR281 billion rupees (USD1.02 billion) in exchange for deferring recovery for five years. Finance Minister Shamshad Akhtar has offered 10%, which he says is the bank's actual cost of money. Negotiations are reportedly at a stalemate, with the banks unwilling to issue no-objection certificates to the privatisation proposal.

The banks' offer is based on five-year Pakistan Investment Bond prevailing rates plus a 2.5% charge. It is a discount to the 23.5% per annum interest rate PIA currently pays. Including the banks, PIA owes assorted lenders and creditors approximately PKR825 million (USD3 billion). The privatisation plan included shifting around PKR640 billion (USD2.3 billion) to a separate entity, making the airline a more sellable proposition. This week, the minister said the full amount would likely be transferred to the separate entity, admitting he had no viable alternatives.

The caretaker government's plan was to sell at least 51% of the now potentially debt-free PIA to a foreign entity, which would take on the airline's day-to-day management and also recapitalise it.

A consortium of financial advisors led by Ernst and Young was due to submit asset valuations by the third week of January after an earlier submission by them was described as "half-baked" by one local news outlet. ch-aviation has contacted parties associated with the consortium to ask if the valuations have gone in. The valuations will assist in preparing audited accounts, which are required to enter into a scheme of arrangement to begin the privatisation process. It is also unclear whether there has been a decision about the sale process, with the available options including negotiation or a public competitive process.