The federal government extended sovereign guarantees for a loan of Rs6.8 billion for another five years after Pakistan International Airlines (PIA) defaulted on payments to Sukuk (Islamic bond) investors, which were due last year.
The decision was taken by the Economic Coordination Committee (ECC) amid a worsening financial condition of PIA.
The loan had been acquired in 2009 and the amount was due to be repaid by December 2013.
Investors had agreed to extend the deadline to December 2013, however, PIA again defaulted and the investors again agreed to roll the debt until October 2019, according to the finance ministry.
PIA will pay an interest rate equivalent to six-month Karachi Interbank Offered Rate (kibor) plus 1.75%.