A day after the federal budget was passed, the government decided to temporarily limit airport outsourcing to Islamabad International Airport (IIA), while it continued to distribute around Rs21.4 billion worth of 14 additional grants.
Finance Minister Ishaq Dar presided over a meeting of a steering committee tasked with deciding whether or not to outsourcing airport operations. However, it was unclear whether or not this would apply to all three major airports in Pakistan: Islamabad, Lahore, and Karachi.
Concerns about the IFC’s financial advising services were also voiced by the participants
According to local news sources, it was decided that only IIA should be allowed to outsource airport operations to a foreign corporation at first, and that additional airports will be added later after receiving the necessary approvals.
According to a vague and brief public statement released after the meeting, IFC “gave a presentation to the committee which took decisions as to the future roadmap for moving forward for outsourcing of the first airport in order to improve service delivery and match best international practices.”
However, a statement from the country’s former finance ministry indicates that on March 31, the Economic Coordination Committee (ECC) decided to launch a 25-year outsourcing of operations and land assets at three major airports, to be run through a public-private partnership, in order to generate foreign exchange reserves. Totaling Rs21.4bn, 14 further awards were granted.
The outsourcing process has just begun
“The outsourcing of three airports has been initiated within the scope of public-private partnership… to do outsourcing of a private investor/airport operator through a competitive and transparent process to run the airports, develop appertaining land assets, enhance avenues for commercial activities, and to garner full revenue potential,” the finance ministry had said.
In the second week of April, the IFC and the Pakistan Civil Aviation Authority (PCAA) signed a transaction service agreement, and then technical teams of advisers went to all three airports to assess the situation. Along with a $4 million success fee upon outsourcing’s completion, the sole bidder, IFC, was also offered a tiered payment structure at the rate of $1.5m for each airport.
Additional Funding Awards
The finance minister also presided over an ECC meeting to sanction Rs21.408bn in supplemental funding for 14 different government agencies. As a result, government agencies demonstrated the efficacy of the public finance mechanism by failing to finalize their financial demands and process them in a timely manner prior to the budget’s presentation in the national assembly on June 9 and even after it was ratified by the parliament on June 25.
Ministry of Planning and Development for the national census; Ministry of Interior and Frontier Corps; and Ministry of Aviation for interest payments received some of the largest supplemental funding. The ECC authorized a Rs6 billion supplemental allocation to the planning ministry for census activities, according to an official statement.
It was reported that out of a total request for Rs34bn, the planning ministry has already received and spent Rs22bn on the census for FY2021-22 and FY2022-23. On June 24th, the Ministry of Finance requested that the Ministry of Planning seek a new extra grant of Rs6bn to cover overdue payments that could not be carried over to the following fiscal year.
The ECC also gave Rs1.4bn to the Frontier Corps (KP) to cover unpaid ration bills, with Rs1bn going to the Frontier Corps KP (North) and Rs400m to the Frontier Corps KP (South). In a similar vein, an extra Rs7.955bn was allotted to the Ministry of Interior under two different heads, mostly to cover the costs associated with paying the personnel of the Frontier Corps KP (North and South), Frontier Corps Balochistan, Frontier Constituary, Pakistan Rangers of Sindh and Punjab.
To help Pakistan International Airlines Corp. meet its five large international overdue payment obligations for services like aircraft leases, insurance, Hajj flights, and IATA dues, the Ministry of Aviation received a substantial supplementary grant of Rs4bn.
The Ministry of National Health Services and Coordination has been granted Rs1.304bn by the ECC to help cover the organization’s debts. The National Security Division received Rs12.30 million to cover employee costs, the Ministry of Parliamentary Affairs received Rs63.60 million, the Ministry of Aviation received Rs222.037 million to cover employee costs, the Islamabad High Court building and Judges’ residences received Rs69.5 million, the President’s Secretariat received Rs60 million, and the Ministry of Climate Change received Rs22.560 million.
To read our article about “State Bank will be closed on July 3rd” click here.
