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ISLAMABAD, May 24: The government has set a target of trade deficit at $4.2 billion, current account deficit at $2.7 billion, capital requirement at $4.62 billion and inflation at eight per cent during the fiscal year 2005-06. According to Annual Plan 2005-06, Dawn has obtained, a target of seven per cent growth rate of GDP has been set, to be supported by 4.8 per cent growth in agriculture, 11 per cent in manufacturing and by 6.8 per cent in services.
Gross National Product (GNP) per capita income has been estimated to touch $803.7 next year against current year’s $683.5.
According to summary for the national economic council (NEC) which meets on May 27, cotton production target has been set at 15 million bales and wheat production at 22.14 million tons for the next fiscal year against 14.6 million bales and 21.1 million tons production respectively achieved during the current year.
The summary says that growth rate would have to be slowed down to control heating up of the economy due to inflationary pressures. It says the extraordinary performance of the economy, which grew by 8.4 per cent during the current fiscal year, was unlikely to be repeated next year.
“The performance of agriculture and manufacturing sectors is not likely to repeat itself”, said the summary. The total size of the GDP has been estimated to grow from Rs6.548 trillion in 2004-05 to Rs7.565 trillion in 2005-06.
Similarly, net factor income from abroad has been projected to go up from Rs125 billion during current year to Rs130 billion next year, thus increasing the size of GNP (gross national product) from Rs6.673 trillion this year to Rs7.695 trillion next year.
The agriculture target of 4.8 per cent is linked with existing performance of major and minor crops as well as sub-sectors like livestock, fishery and forestry on the premise of expected higher water availability, adoption of water saving techniques, improved pest control and changes in cropping patterns.
The value addition of major crops is targeted to grow by 6.6 per cent compared with 17.3 per cent witnessed during 2004-05. The sugarcane production is targeted at 50.10 million tons as against 45.3 million tons during the current year.
Rice and maize productions are estimated to grow at five million tons and 2.9 million tons respectively against achievements of 4.99 million tons and 2.78 million tons respectively during the current year.
MANUFACTURING: The manufacturing sector is targeted to grow by 11 per cent, a rate envisioned to consolidate the higher growth rates achieved on the average of 11.1 per cent during 2001-05.
The growth rate of this sector is premised on the growth of the LSM (large-scale manufacturing) of 13 per cent and small and household manufacturing of 7.4 per cent. The automobiles (jeeps, cars, tractors and motorcycles), petroleum products, chemicals, cement, cotton yarn and cloth, textile made-ups, engineering goods, air-conditioners, motor tyres, fertilizers and electronic goods would be the main growing industries.
CONSTRUCTION: A major growth momentum is expected for the construction industry, which is forecast to grow by 7.5 per cent as against an estimated growth of 10 per cent during 2004-05.
ENERGY: The electricity, gas and water supply sectors are projected to grow at the rate of 3.5 per cent.
SERVICES: The services sector is targeted to grow by 6.8 per cent. The main contributors of value-added in this sector will be sub-sectors like transport and communication, wholesale and retail trade and finance and insurance which are targeted to grow by 5.8 per cent, 9.3 per cent and 6.7 per cent respectively.
INVESTMENT: The total investment is targeted at Rs1.369 trillion (18.1 per cent of the GDP) during 2005-06. The increased flow of investment is based on the assumption of a favourable investment climate. About 68.5 per cent of fixed investment will be covered by the private sector and remaining 31.5 per cent by the public sectors.
INFLATION: The target rate of inflation (CPI) has been placed at eight per cent compared to 10 per cent during current year. Reduction in inflation rate will be achieved by a tight monetary policy, removal of supply constraints and effective monitoring of price situation by provincial governments and public representatives.
BALANCE OF PAYMENT: The fiscal year 2005-06 is expected to experience an increase in the trade deficit due to higher imports than exports. Exports (fob) are projected to grow by 11.93 per cent to $15.7 billion while imports are forecast to increase by 12.96 per cent to 19.8 billion, thus leaving a trade deficit of $4.16 billion against a projected deficit of $3.56 billion in 2004-05.
The imports are expected to increase due to increased payments for capital goods, raw materials, POL, fertilizer and edible oils.
INVISIBLE ACCOUNT: For 2005-06, remittances have been projected at $4.02 billion against $4 billion during 2004-05. Allowing for other invisible receipts and payments, the surplus on invisibles account is anticipated to decrease to $1.46 billion from a surplus of $1.64 billion during 2004-05.
CURRENT ACCOUNT BALANCE: With a deficit of $4.16 billion on the trade account, the current account deficit is estimated to increase to $2.7 billion (2.2 per cent of GDP) in 2005-06 from a deficit of $1.91 billion (1.75 per cent of GDP) in 2004-05.
CAPITAL ACCOUNT: Gross aid disbursements are estimated to decrease from $2.25 billion in 2004-05 to $1.43 billion in 2005-06. Allowing for other capital flows, the capital requirement is estimated to increase from $3.99 billion in current year to $4.62 billion next year. The financing of these requirements would be made through normal disbursements of medium and long term loans, capital and foreign investment and exceptional financing to be financed through multinational institutions.
However, other capital including foreign direct investment portfolio is anticipated to increase from $0.21 billion in 2004-05 to $0.26 billion in 2005-06. The gap will be financed through exceptional financing.
FISCAL AND MONETARY POLICY: The fiscal policy will remain consistent with the stance already adopted by the government.
Main thrust would be on increasing revenues through broadening tax base and improved tax collection by federal, provincial and district governments.
