July 16, 2003	Wednesday	Jumadi-ul-Awwal 15, 1424

KARACHI, July 15: Macroeconomic stabilization will continue to remain focus of all economic policies of the government for the next five years during which the plan is to modestly raise the development expenditure from 3.2 per cent to 4.2 per cent of the GDP.

The government considers an average 5.8 per cent economic growth every year for the next five years as feasible and achievable. Raising the GDP growth from 5 per cent to 6.5 per cent during the coming five years would mean additional job creation of three million by 2007-08 is the conclusion of a five-year plan drawn up by the planners.

Under this plan, the manufacturing sector would contribute 17.9 per cent of the GDP by 2007-08 as against 16.3 per cent at present. The agricultural sector would continue to contribute 23.7 per cent of the GDP.

This tentative fiscal policy package outlining the government’s strategy focusing mainly on bringing down the fiscal deficit to 2.9 per cent of the GDP by 2007-08. During the last three years, the government has not been able to bring down fiscal deficit even below 5 per cent in face of all stringent fiscal measures.

Encouraged by more than 14 per cent growth in revenue in the outgoing fiscal year 2002-03 the tentative five-year fiscal plan proposes 14.3 per cent every year. But efforts will be made to restrict non-development expenditure to 18.8 per cent of the GDP.

In all these five years period the monetary policy will be designed to keep expansion of monetary assets within 11 per cent level. Monetary expansion during 2002-03 went up to 16 per cent pushing up inflation to near 5 per cent level. But the government’s focus is now to keep monetary growth up to 11.3 per cent in the current fiscal year 2003-04. Inflation rate in the current fiscal year is projected at 3.90 per cent.

Monetary expansion during the next four years of the five-year fiscal plan is expected to be at 10 per cent in 2004-05, 10.5 per cent in 2005-06, 10.8 per cent in 2006-07 and 10.6 per cent in 2007-08. Inflation is targeted to remain at 4.20 per cent in 2004-05, 4.40 per cent in 2005-06, 4.70 per cent in 2006-07 and 5 per cent in 2007-08.

The government wants to control the prices and ensure improved availability of essential items like wheat, flour, rice, sugar, vegetable ghee, pulses and vegetables to the consumers. Simultaneously, the objective is to ensure adequate financing for the productive sectors of the economy.

In order to sustain an average GDP growth of around 6 per cent a year, the government intends to take adequate steps to raise investment level from 15.6 per cent of the GDP in 2002-03 to 18.7 per cent of the GDP in 2007-08. In absolute terms, this means formation of Rs4,353.5 billion of fixed capital during the next five years. Total investment is estimated at Rs4,844.6 billion.

Almost 98.5 per cent of this proposed investment is expected to be financed from domestic savings which are expected to grow to a level of 17.4 per cent of the GDP. Strict budgetary discipline, and revenue generation, will be the hallmark of financial policies for the next five years.

The government planners have taken a rather modest and realistic assessment of direct foreign investment inflow, which is expected to be about one billion dollars every year.

The tentative plan stipulated $10.8 billion exports in the current fiscal year, which in fact has been exceeded in the outgoing fiscal year when total export earnings in 2002-03 are estimated to have touched $11.2 billion. Export planners are now projecting exports to go beyond $12 billion by next June.

A revival of manufacturing sector is bound to push up import demand for capital goods and raw material. This could also knock out all projections of international trade.