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Problems mount for Pakistan International Airlines, losses touch PKR 600 Billion, unable to operate a single day without funds from the national kitty

A top official expressed concern that the airline's financial woes could eventually force its closure if the government stops infusing funds into the loss-making entity.

Pakistan International Airlines (PIA), the country’s national carrier, is facing an unprecedented financial crisis, raising concerns about its ability to continue operations without support from the national fund. The accumulated losses of PIA have soared to over PKR 600 Billion, compelling the government to contemplate a time-bound restructuring plan through shadow management to salvage the airline’s future.

According to reports, the situation has become so severe that Pakistan International Airlines was unable to pay USD 50 million in navigation charges to Saudi Arabia, leading to potential disruptions in its operations after June 30, 2023. A top official expressed concern that the airline’s financial woes could eventually force its closure if the government stops infusing funds into the loss-making entity.

To counter the crisis, Pakistan International Airlines has outlined plans to include a Boeing 777 in its fleet by securing it on a lease, expanding its number of planes to 11. Nevertheless, given the bleak financial position, a comprehensive restructuring plan is seen as the only viable solution, potentially resulting in the division of PIA into three to four separate entities.

In addition to PIA’s troubles, Pakistan’s overall economic situation presents various challenges. The International Monetary Fund (IMF) has suggested that undertaxed sectors, such as agriculture and construction, could be potential revenue sources if brought fully into the tax net. However, the federal minister for finance and revenue, Ishaq Dar, has denied any plans to tax these sectors further, leading to contrasting views on potential revenue generation strategies.

The PIA management recently held a meeting with Finance Minister Ishaq Dar to discuss reviving the airline. During the meeting, it was highlighted that the airline could not be privatised due to legal constraints arising from its conversion from a statutory organization to a corporatised entity in 2016.

The Pakistani economy also faces challenges in revenue mobilisation. Tax collection from the agriculture sector in Punjab and Sindh, despite contributing significantly to GDP growth, remains disappointingly low at just PKR 4 billion per annum. Experts argue that to raise additional revenue, it is essential to target undertaxed sectors, including agriculture and real estate.

With over 35 per cent of the workforce and 22.7 per cent of GDP dependent on agriculture, there is a need to explore avenues to enhance tax collection in this sector. One suggestion is to increase flat tax rates for agriculture, particularly on irrigated lands. Similarly, the possibility of imposing a capital gains tax and conducting a comprehensive property valuation to correct tax anomalies on real estate merits consideration.

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Searched termsbankrupt Pakistan
OpIndia Staff
OpIndia Staffhttps://www.opindia.com
Staff reporter at OpIndia

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