How Pakistan’s PIA was forced to its knees
The IMF’s ruthless squeeze on the PIA
When I was a kid, I sometimes flew to Pakistan on PIA, the country’s government-owned carrier. The airline has existed since Pakistan’s founding, but it was infamous for poor service.
So let’s look at the facts, today. For starters, the airline isn’t even worth $305 million. How do we know? It wouldn’t sell for that much as a minimum price at an auction in 2024, given its $2.3 billion debt.
What the PIA owns
PIA currently operates 34 aircraft, but only about half are active:
Boeing 777: 12 total (only 5 active)
Airbus A320: 17 total (only 10 active)
Small propeller aircraft: 5 total (only 2 active)
In short, just 17 out of 34 planes were in service—meaning half the fleet was grounded. That’s insane. A Boeing 777 shouldn't just collect dust. Even a used old one is worth $10 million.
Surprisingly, PIA owns the Roosevelt Hotel — a 1,025-room property in New York City worth about $1 billion. Despite the struggling U.S. real estate market, this was one of PIA’s rare smart investments. They bought it for just $36 million, a great deal with a long backstory.
The airline operates 41% of the domestic airline market, employing 8,000 staff. But this isn’t without controversy either. Many of their pilots had fake licenses — 150 out of 434 pilots — which led to the airline getting banned internationally. But the story is more complex — it may involve intentional leaks in a turf war between military pilots and civilian union pilots over control of an agency that was newly led by a military air marshal.
What the PIA owes
As of 2024, it had a total of $2.3 billion in debt. Worse, it lost $3.6 billion in the last 20 years. It last turned a profit in 2004.
You see all those Boeing 777s? The PIA took riba loans in 2003 to purchase most of their Boeing 777 for $125 million a piece in 2003. (By the way, this was during Musharraf’s military rule. Can’t just blame civilian incompetence.)
The April 2024 auction failed to even get the minimum bid of $305 million. No one wants to own this zombie.
How the IMF decided PIA’s fate
IMF loans are typically short-term, whereas World Bank loans are long-term.
In September 2024, the IMF approved a $7 billion loan to Pakistan at a 5% interest rate, to be disbursed over 37 months. But the IMF doesn’t just hand out loans. They extort as much as they can before and during the agreement.
Leading up to the September 2024 deal, it was widely understood that the IMF intended to extract its share of interest — riba — from Pakistan. To do so, it pressured the government to eliminate various subsidies and possessions that it deemed wasteful. The rationale was simple: every rupee garnished could go toward servicing the IMF’s interest.
One of the IMF’s major targets was the PIA. A British firm Ernst and Young was the “financial advisor” for PIA’s privatization. Ernst and Young would get paid a few million for the failed 2024 auction.
But remember the airline is essentially a $2.3 billion indebted zombie that needs to declare bankruptcy. No one wants it. So what did the IMF do?
To make the airline attractive to potential buyers, they split PIA into two separate entities: PIA Corporation and PIA Holding. PIA Corporation was saddled with the $2.3 billion debt, while PIA Holding retained control of the airline's operations and assets.
In effect, the government took on the burden of the debt—absorbing the "riba bag"—while preparing PIA for sale. The goal was clear: the IMF would recover funds from the airline's privatization, while Pakistan’s government would directly shoulder the debt. And the IMF green-lit the process by cutting the red tape and approving the plan.
And then the fake news
After Ramadan 2025, the news media were prepped with headlines like this “PIA achieves net profit after 21 years”. It’s clear to everyone that this news report is an attempt to attract buyers to PIA Airlines for its next auction attempt. But let’s look more closely at the numbers.
PIA reported an operating profit of $33 million and a net profit of $94 million. This is a red flag. Operating profit is what you earn before taxes and interest (riba) payments. So how is the net profit more than the operating profit?
Simple: the government is still subsidizing the airline a bit. Instead of paying taxes, they’re receiving money from the government—getting paid with tax dollars.
The story is bad enough when you look at the picture. The PIA, even with no debt payments, would only make $33 million a year.
Maybe it's a good thing that it's being privatized. But this should be taken as a lesson: riba is what’s destroying Pakistan. The same riba that many of your neighbors use to buy their homes—this is just its macro-level version.
