IMF agrees to end federal excise duty on international tickets

The International Monetary Fund (IMF) has given Pakistan permission to waive the Federal Excise Duty (FED) on international tickets for Pakistan International Airlines (PIA).

The PIA tickets are likely to get cheaper by up to PKR 350,000 to USA, PKR 105,000 to Africa and Middle East, PKR 210,000 to Europe, Australia, New Zealand and the countries in the Far East.

Privatization Commission (PC) officials told Nukta that the IMF approved the waiver at the request of the Pakistani government. The FED will still apply to domestic tickets.

The government has heavily taxed international travel, imposing at least PKR 56 billion in additional FED on air travel during the 2024 budget. PC officials said the Washington-based lender also allowed Islamabad to waive the 18% sales tax on the purchase or lease of new aircraft.

Additionally, the IMF agreed to transfer PKR 46 billion in negative equity associated with PIA to a holding company. This measure is expected to reduce operational costs and improve PIA’s financial health.

Officials emphasized that Pakistan is serious about privatizing PIA. The federal government is amending rules to allow potential bidders to compete for a 60% stake in the airline.

Earlier, the PC had shortlisted six groups to bid for shares in PIA: Airblue Ltd., Arif Habib Corporation Ltd., Air Arabia's Fly Jinnah, Y.B. Holdings Pvt., Pak Ethanol Pvt., and real estate consortium Blue World City.

On October 31, 2024, a real estate developer offered PKR 10 billion against the minimum sale price of PKR 85.03 billion to privatize PIA. However, Prime Minister Shahbaz Sharif's cabinet rejected Blue World City's PKR 10 billion offer for a 60% stake.

The Pakistani government has divided PIA into two entities, moving PKR 623 billion in liabilities from the main PIA to a holding company.