Employees of the national airline walked out in protest over its planned privatisation, disrupting flights and undermining a central plank of reforms promised by Prime Minister Nawaz Sharif in return for an International Monetary Fund (IMF) bailout.
Two years ago the IMF had agreed to lend $6.7 billion over three years in order to save the country from possible default. In return, the government of Pakistan agreed to broaden its tax base, cut electricity subsidies and privatize failing state companies that cost taxpayers around $5 billion a year.
Soliciting buyer interest in Pakistan International Airlines (PIA), whose accumulated losses are expected to reach at $2.29 billion by December 31, the privatization of the national carrier is now an imperative for IMF funding to continue.
On December 5, the government issued a presidential decree to turn the failing airline into a limited company.
In support of the 1956 law, which prohibits this, political opponents and airline staff held strikes accusing the government of bypassing parliament by opting for a decree over an amendment that would require lawmakers to vote.
Airline offices, including reservation booths, remained closed throughout the week and pilots joined the strike.
Chairman of the privatization commission, Mohammad Zubair, told Reuters the government had informed union representatives that advertisements for PIA’s sale would be published on December 31, irrespective. .
In 2013, Zubair has said that Pakistan would fetch up to $5 billion in privatization revenue in two years to raise capital for an economy crippled by years of power shortages, corruption and militant violence.
“Despite some delays, the authorities’ privatization and restructuring program continues to move forward,” IMF’s Mission Chief for Pakistan, Harald Finger, informed Reuters.
Once a source of pride for the country, PIA has fallen badly with flights regularly cancelled and many of its aircraft have been cannibalized to keep flying.
The government has sought to assuage fears that its sale would lead to big redundancies, but it will, despite Finance Minister Issaq Dar holding, “No employee of PIA will be laid off during privatization”. The fact is that the airline is grossly overstaffed.
Privatization falls under the privatization commission, but officials and analysts say Dar exerts full control over all finance-related decisions. Dar declined requests for an interview to discuss the issue.
Fierce resistance by labor unions has made the program politically sensitive, as in the case of Pakistan Steel Mills, a behemoth with reported losses of $1.42 billion.
In November, after being informed by officials that the bleeding enterprise would barely fetch $100 million against an expected $900 million, Dar decided to hand it over to the provincial government in Sind where it is headquartered.
In the eyes of most economists the government has finally succeeded in doing what previous governments had failed to do.
“Government after government has talked about finally taking care of this (PIA) problem and now we are doing it. This shows our political will,” Zubair said. “Let’s not make this process unnecessarily controversial,” he asserted.