ISLAMABAD: The federal government has approved over Rs 4.5 billion to meet funding requirements for the settlement of claims and carved-out liabilities of PIA Holding Company Limited (PIAHCL) on the recommendations of the Ministry of Defence.
On April 27, 2026, the Ministry of Defence (MoD) briefed the Economic Coordination Committee (ECC) that PIA Holding Company Limited is a state-owned enterprise of the federal government, established on May 3, 2024, under Section 282(3) of the Companies Act, 2017. The company was created to take over non-core assets and liabilities of Pakistan International Airlines Corporation Limited (PIACL) to facilitate its smooth privatization.
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The ECC was informed that the Securities and Exchange Commission of Pakistan (SECP) had approved the scheme of arrangement for transferring these liabilities, which include rental mark-up on loans, foreign exchange cover, and medical and pension liabilities of PIACL employees.
The MoD further stated that following the successful privatization of PIACL—with a winning bid of Rs 135 billion for a 75 percent stake—the transaction documents, including the Share Purchase and Subscription Agreement (SPSA) and Shareholders’ Agreement (SHA), were approved by the Federal Cabinet on December 31, 2025, and executed on January 29, 2026.
Under the SPSA, PIACL is required to maintain positive net equity as a condition precedent for divestment, which is dependent on the timely recovery of receivables from PIAHCL to avoid adverse audit observations related to Expected Credit Loss (ECL).
The MoD highlighted that PIAHCL does not have sufficient cash flows and relies on federal government support to meet its liabilities.
The Federal Cabinet, in its decision dated December 9, 2025, had approved budgetary allocation for PIAHCL, subject to independently validated third-party claims.
Accordingly, a financial audit review of PIACL’s claims was completed, after which PIAHCL submitted a reconciled and board-approved funding request totaling Rs 5.984 billion. The breakdown includes: (i) Rs 1.134 billion payable to National Insurance Company Limited (NICL); (ii) Rs 4.149 billion for reimbursement of medical and pension payments made by PIACL; (iii) Rs 246 million for reimbursement of net adjusted pension payments made by PIAHCL from October 2025 to January 2026; and (iv) salary payments for employees of Precision Engineering Complex.
The MoD informed that the Finance Division had endorsed payment of Rs 4.15 billion for medical and pension claims, along with Rs 456 million for salaries of Precision Engineering Complex employees, to be released through Technical Supplementary Grants (TSG) from savings.
Regarding the NICL payment of Rs 1.134 billion, the Finance Division suggested that it should be addressed through the adjustment/refund mechanism rather than a direct budgetary release. However, the Federal Board of Revenue (FBR) conveyed that PIACL’s claim for a refund against the NICL payment was not tenable.
Copyright Business Recorder, 2026
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