ONE swallow does not make a summer. Does it? The sale of PIA has fetched the government much praise — if not much cash. Simultaneously, it has stirred hopes that the first major privatisation in more than two decades would pave the way for the disinvestment of the other white elephants, sooner than later.

Many expect the transaction to help revive investor confidence, with foreign private parties potentially lining up to invest in the country or acquire other loss-making state assets on the chopping block. Indeed, PIA’s sale makes a strong case for the government to forge ahead with its privatisation agenda, while taking advantage of the feel-good sentiment this transaction has sparked.

For Pakistan, privatisation of state-owned enterprises no longer signifies an ideological choice but an economic necessity. Most SOEs, like the national flag carrier, are a heavy burden on the budget with their combined losses running into hundreds of billions of rupees every year at the taxpayers’ expense. Needless to say these losses are squeezing funds that could be used to build hospitals and schools, distorting markets and undermining public services delivery.

While it is critical to sustain this momentum if the government is to durably stabilise its budget and create some fiscal space for development, this will not happen automatically. Nor will the PIA sale help restore investor interest any time soon. The process of privatisation is going to be long and demands painful structural reforms to actually boost business sentiment in the country.

In recent years we have seen dozens of foreign companies exit the Pakistan market due to tough economic conditions, exchange rate volatility, difficulties in profit repatriation, policy unpredictability, poor regulatory environment, heavy tax burden, and delays in settlement of commercial disputes. On top of that, high energy costs and disruptions in supply chains due to foreign exchange restrictions have further eroded competitiveness and business confidence in recent years.

Local investors too are not very bullish on fresh investment, at least not for the moment. The absence of foreign investors from the PIA auction shows reluctance on their part to become part of Pakistan’s economy in any way. Even local investors, who won the bid, had to rope in Fauji Fertiliser for institutional protection to hedge against any future policy reversals or adverse actions.

If privatisation is to succeed, the government must move decisively on multiple fronts: strengthen regulators for effective governance, guarantee policy continuity, broaden tax base, alleviate burden on compliant businesses, ensure rule of law for quicker settlement of commercial disputes, reduce cost of doing business etc. Without these structural reforms, individual transactions like PIA may succeed once in a while, but the broader privatisation agenda will continue to stall.

Perhaps, this is the time for the government to seize the opportunity to undertake structural reforms that have long prevented Pakistan from attracting direct foreign private investment.

Published in Dawn, December 28th, 2025