The authorities in Pakistan have approved a multi-million US dollar restructuring package for Pakistan Steel Mills (PSM).

The package includes an additional letter of credit (L/C) facility for the state-owned steel producer to purchase raw materials.

Application of funds

Pakistan's Economic Coordination Committee (ECC) has approved a US$188 million cash injection for PSM.

Of the total, US$92 million will be made directly available to PSM for raw material purchases.

A further US$30 million will be paid to the National Bank of Pakistan for an additional L/C facility to purchase raw materials.

Privatisation

The steel mills are currently running at around 3-6 per cent capacity due to financial problems caused by mismanagement and corruption.

Pakistan's government is hoping the cash injection and restructuring plan will revive the company and make it more attractive for its planned privatisation in June 2015.

If the restructuring plan has the desired impact, the plants' capacity used should increase to around 80 per cent and PSM will become profitable.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.