ISLAMABAD: Pakistan expects to raise up to $723 million from the privatization of state-owned businesses and airport operations by June 2027, the country’s privatization adviser told Arab News in an interview on Friday, outlining an ambitious plan to attract private investment and ease the burden on public finances.

The drive is part of reforms under Pakistan’s $7 billion International Monetary Fund (IMF) program, which seeks to reduce the financial drain from state-owned enterprises, improve public services and revive investment in an economy struggling with high energy costs and longstanding structural weaknesses.

The government is targeting at least six transactions, including the sale of three electricity distribution companies and two financial institutions, alongside a long-term agreement to hand over operations at Islamabad International Airport. Investors from Türkiye and Saudi Arabia have expressed interest in the electricity companies, while Pakistan is courting international operators for its airports.

“Hopefully, we are looking at around Rs150-200 billion [$542-723 million] this fiscal year,” Privatization Adviser Muhammad Ali said.

The three electricity companies serve Faisalabad, Gujranwala and Islamabad, while the financial institutions include agricultural lender Zarai Taraqiati Bank Limited and House Building Finance Corporation.

Turkish groups, including Calik, Cengiz and EkoTürk Enerji, are among those interested in the electricity companies. A Saudi investor is also participating in the process for Islamabad’s power distributor, alongside several Pakistani business groups.

“We have one Saudi entity also participating in Islamabad,” Ali said. “Interest so far is from Saudi and Turkiye.”

Pakistan has spent years trying to reduce the losses of state-owned enterprises, many of which have become a recurring burden on public finances. Its privatization efforts have repeatedly faced political resistance, while the financial problems of some businesses have made them difficult to sell.

Last year, the government sold Pakistan International Airlines (PIA), the debt-ridden national carrier, in a transaction seen as an important test of its ability to carry out major privatizations.

Ali said the government was pursuing 17 transactions in total, including nine electricity distribution companies, three airports, two insurance firms and two financial institutions.

The next electricity companies expected to be offered are those serving Hyderabad and Sukkur, with Ali anticipating further interest from the Middle East.

Sovereign wealth funds from Qatar and Kuwait have also expressed interest in the past, although their participation in the current transactions remains uncertain.

“As transactions progress, I think we might be able to see some interest from those countries also,” he said.

Beyond the sale of state businesses, Pakistan is looking to private operators to modernize its airports, with Karachi and Lahore potentially requiring more than $500 million in investment to expand their capacity.

The government hopes to invite bids for the long-term operation of Islamabad International Airport by the end of December, with the Asian Development Bank advising on the transaction.

“End-December is a major deadline as far as RFP issuance is concerned and we are trying to achieve that,” Ali said.

For Karachi and Lahore, the government has selected Ernst & Young as its financial adviser, with the privatization process expected to take about a year.

“We are targeting signing the agreement with them either next week or the week after. Once that is done, then work on Karachi and Lahore will start,” he said.

The privatization drive could eventually extend to some of Pakistan’s largest energy businesses, including Pakistan State Oil and the two state-owned gas distributors, Sui Southern Gas Company and Sui Northern Gas Pipelines.

Ali said the government was considering retaining strategically important parts of Pakistan State Oil, such as fuel storage, while opening its retail fuel stations and liquefied natural gas terminal operations to private investment.

“The width of the offering will be increasing going forward,” he said, referring to plans to bring more state-owned businesses and operations into the privatization program.

The financial strain facing the gas companies illustrates the challenge. Ali said their accumulated circular debt — a buildup of unpaid bills and other financial obligations across the energy supply chain — had exceeded Rs3 trillion ($11 billion).

“These problems will not be resolved unless we privatize these companies,” he said.

High electricity prices present another obstacle. Pakistani manufacturers have long complained that expensive power makes their products less competitive, while the government hopes lower tariffs will help attract investment and support industrial growth.

“Anything below 9 cents, yeah, 7 to 8 cents would be ideal,” Ali said, referring to the price of electricity per kilowatt-hour. “If we can bring our tariff below 9 cents, I think that’s a good start.”

The government has proposed introducing greater competition into the electricity market, allowing power suppliers and buyers more freedom to negotiate prices rather than relying entirely on the existing regulated system.

“We are proposing that we should have a competitive market very quickly in Pakistan, so that tariffs can come down,” Ali said.

The government is also considering options for the Roosevelt Hotel in New York, a prominent Manhattan property owned by PIA.

Ali said Pakistan had signed a memorandum of understanding with the US General Services Administration and was discussing possible arrangements, although no final decision had been reached.

“I think in the next few months, we should have clarity. Work is already happening,” he said.

Asked about the IMF’s opinion of Pakistan’s privatization progress, Ali said the international lender had been supportive of the program, although completing the wider set of transactions could take a year or longer.

“I would assume that they are very happy with the way things are, because they can see that effort is being made, and things are moving forward,” he said.