PIA sell-off set for July, IMF told

Express Tribune

10-03-2025

The government has assured the International Monetary Fund of selling the Pakistan International Airlines by July, but the future of Roosevelt Hotel in New York has yet to be undecided amidst the US decision to terminate the $228 million worth lease deal prematurely.
In a briefing to the IMF over Pakistan's virtually stalled privatisation programme, the federal authorities said that they will try to privatise five to seven enterprises, including PIA, three financial institutions and three power distribution companies, according to the government sources.
Among the financial institutions that will be privatised is the Zarai Taraqiati Bank Limited (ZTBL) and the government is hopeful to sell it off by November this year.
The global lender has been told that the Cabinet Committee on Privatisation would make a decision whether to sell the priciest Roosevelt Hotel or give it under a joint lease agreement. The hotel, owned by PIA, is located in an area considered among the top 1% of the most expensive properties in the world.
The hotel has 1,025 rooms and Pakistan had given it on a three years' lease to the Immigrant Housing Business by the New York City Government in July 2023.
But the IMF was informed that the New York City government had given a notice to end the deal with effect from July – one year before its expiry. This would cause around $80 million loss of business. The city government had taken the hotel at $210 per room for the third year.
In November last year, the CCOP had apprehended that President Donald Trump's anti-immigration policies could impact the $228 million three-year deal. The IMF was informed that the authorities were looking for alternate business options.
However, despite hiring one after another financial advisor, the government has not yet been able to take a clear decision on the privatisation of the Roosevelt Hotel. Pakistan hired Jones Lang LaSalle Americas as the financial advisor for the Roosevelt privatisation transaction at a cost of Rs2.1 billion. The advisor's fee includes milestone-based payments and a success fee of 0.95% of the sale proceeds.
The IMF was told that the CCOP would soon take a decision on the mode of privatisation of the hotel, based on input by a committee headed by Ali Pervaiz Malik, now federal minister for petroleum.
The committee has recommended privatising the valuable Roosevelt Hotel in New York through open bidding after Saudi Arabia failed to show formal interest in acquiring the PIA-owned property. But the CCOP has not yet taken up the committee report for a decision.
The Privatisation Commission said last year that under a government-to-government arrangement, a foreign government must formally declare its interest before invoking the Inter-Governmental Commercial Transaction Act. As of late December, no foreign government had shown formal interest to acquire the hotel, according to the committee's proceedings.
The special committee has proposed to the CCOP that the hotel be sold via open and competitive bidding. However, the committee also left it to the Privatisation Commission to decide whether to outright sell the hotel, develop it as a joint venture, or lease it for 99 years.
PIA Privatisation
The Privatisation Ministry also briefed the IMF about the status of the PIA privatisation and gave a July 2025 deadline to sell the loss-making entity, said the sources.
The government's earlier attempt to privatise PIA had badly failed after its weak scrutiny process ended up at selecting a real estate developer as the sole bidder. The sole bidder had given Rs10 billion offer, which was many times lower than the minimum ask price of Rs85 billion.
The sources said that the IMF was informed that the government was in the process of gauging the market sentiment before issuing the Expression of Interest for inviting the investors by the end of this month.
It seems the government is not very confident about the success of the second attempt as it has again started the process of checking the investors' confidence and whether there is any appetite for buying a bleeding asset.
The authorities informed the IMF that three parties may take part in the bidding. These include two bidders who had earlier withdrawn from the process after the government did not accept the condition to waive off 18% sales tax on lease of the aircraft and taking out Rs45 billion liabilities from the PIA balance sheet before its privatisation.
The IMF has already agreed to relax these two conditions, which along with opening of European routes are considered as major incentives for the success of the second bid on the privatisation.
Bleeding Power sector
The IMF has been informed that the government wanted to sell three power distribution companies Faisalabad, Islamabad and Gujranwala by December this year. However, the decision whether to sell all these entities in one go or take each enterprise separately in the market will be taken in the advice of the financial advisor.
The IMF inquired whether there was any commercial debt owed by these three power distribution companies.
The government does not have a plan to sell any power generation company this year, the IMF was told.
Financial Institutions
The sources said that the government has also informed the IMF that the United Arab Emirates was interested in buying the First Women Bank Limited as a full commercial bank and the deal is expected by the end of May. However, the UAE wants to acquire the bank under the government-to-government deal instead of participating in the open bidding.
The sources said that the government was also in the process to hire a financial adviser for the sale of the ZTBL. The government is hoping to sell the bank by November this year, said the sources.
The authorities also expect to sell the House Building Finance Company next month –yet another deadline after earlier multiple deadlines lapsed.