The Pakistani government has approved a supplementary grant of PKR4 billion rupee (USD14 million) to PIA - Pakistan International Airlines (PK, Islamabad International) to help pay interest on legacy loans and overcome cash flow problems at the heavily-indebted state-controlled carrier.

The announcement was made by Federal Minister for Finance and Revenue Mohammad Ishaq Dar, who chaired a meeting of the Economic Coordination Committee (ECC) of the Cabinet on June 26.

According to the Federal Budget 2023/24 document seen by ch-aviation, the government already allocated PKR15 billion (USD52.5 million) to PIA in loans and advances in the 2022/2023 budget. PIA requested an additional PKR45 billion (USD157.1 million), but the ECC only approved an additional PKR4 billion and instructed the airline to arrange the remaining PKR19 billion (USD66.7 million) from commercial banks.

According to the airline financial report for the three months ending March 31, 2023, PIA continues to face liquidity problems resulting in increased borrowings pushing finance costs up by 72% in interest rates. The devaluation of the Pakistani rupee during the period also contributed to the airline's increased loss before tax of PKR36.3 billion (USD81.9 million) for the three months ending March 31, 2023.

As reported, in 2017, the government agreed to cover PIA's interest payments for five years conditional on the airline's restructuring. However, between late 2017 and September 2022, PIA's losses reached PKR633 billion (USD2.2 billion). According to the financial report, government support to the airline since 2018 has totalled PKR89.1 billion (USD312.7 million). In April 2023, the ECC approved an increase in the sovereign guarantees limit to PIA to PKR263.2 billion (USD924.5 million).

However, diverting operational funds to service the debt has resulted in a cash flow shortage. On May 29, one of PIA's lessors, AerCap, impounded an B777-200ER, AP-BMH (msn 32717), in Malaysia over a lease payment dispute, while engine lessor Willis Lease Finance on June 6 initiated a lawsuit in the US District Court for the Southern District of New York over unpaid engine leases. The airline said it had made a payment on "all the dues against the engines" and returned them to the lessor.