The caretaker cabinet approved a privatisation plan for loss-making Pakistan International Airlines on Tuesday, days after the country’s election panel directed it to refrain from making any final deal.

The cabinet’s approval is a crucial pre-requisite to taking the airline to market for a sale, which the election panel said should be put on hold until it has reviewed the plan.

The interim government recently sealed the plan to put the national carrier up for sale, Reuters reported last week.

“These steps will help attract the investors toward PIA,” the prime minister’s office said in a statement, adding that the transaction adviser Ernst & Young had completed a plan for the financial restructuring of the loss-making airline.

The statement did not refer to the directive from the election panel. But Prime Minister Anwaar ul Haq Kakar has previously said the process will be handed to the incoming government for further implementation, including carrying out the sale, after the cabinet approval of the restructuring of the airline for privatisation.

The plan to tie an incoming government’s hands on privatisation underscores the economic challenges a new administration will face under tough conditions imposed by an International Monetary Fund bailout, with the South Asian nation of 241 million people reeling from decades-high inflation.

The cabinet gave its approval on the recommendation of Pakistan’s privatisation commission, a body assigned to sell off all loss-making state-owned enterprises (SOEs).

The restructuring plan has split PIA into two entities.

One ‘clean’ one will be offered up for sale and the other will be parked in a holding company with legacy debt, which includes negative equity of Rs825 billion ($2.95 billion) in loans, creditors’ money and losses.

The statement from the prime minister’s office said the plan which had been approved would “divide the PIA into two companies, TopCo and HoldCo”.

It said PIA’s core operations, engineering, ground handling, cargo, flight kitchen and training will be part of TopCo, while its precision engineering complex, PIA investment Ltd and other departments and properties will be included in HoldCo.

The cabinet also directed the cabinet Sub-committee on Privatisation to deal with the matters related to the settlement of government-owned enterprises with PIA “as soon as possible.”

Pakistan agreed with the IMF last June to overhaul the SOEs under a deal for a $3 billion bailout and the outgoing government decided to privatise PIA just weeks after signing it.

The caretaker cabinet, which took office in August to oversee this week’s election, was empowered by the outgoing parliament to take any steps needed to meet the budgetary targets agreed with the IMF.

PIA has liabilities of Rs785 billion ($2.8 billion) and accumulated losses of Rs713 billion ($2.55 billion) as of June last year.

Progress on privatisation will be a key issue if the new government goes back to the IMF once the current bailout programme expires in March, analysts say.

On the recommendation of the ministry of Privatization, the cabinet also approved the privatisation of First Women Bank Limited.

It further approved the proposals regarding de-regulation of the prices of the medicines which were not included in the national list of essential medicines.

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Under these proposals, prices of medicines other than essential medicines in the national list will be exempted from the Drugs Act, 1976 and necessary amendments will be made in the Drug Pricing Policy 2018.

Furthermore, the Pakistan Medical and Dental Council would ensure that doctors will not prescribe vitamins, multivitamins, minerals and over-the-counter products to the patients.

Meanwhile the cabinet approved the appointment of Lt General Tahir Hameed Shah as a member and chairman of the Pakistan Ordnance Factories Board on the recommendation of the Ministry of Defense Production.

The appointment of Lt General Tahir Hameed Shah will be effective from November 29, 2023.

On the recommendation of the Ministry of Law and Justice and the proposal of the chief justice of Peshawar High Court, the cabinet approved the conversion of four out of eight accountability courts in Peshawar into special courts.