Govt to maintain strict financial discipline: 8.2pc GDP growth by 2010
By Ihtasham ul Haque
ISLAMABAD, Oct 4: The government has decided to strictly maintain financial discipline and macroeconomic stability for achieving what is termed “hard and demanding” GDP growth rate of 8.2 per cent by 2009-10.
Informed sources told Dawn on Tuesday that the government had asked its economic managers to ensure the sustained annual average growth of 7.6 per cent without compromising “macroeconomic stability” during the next five years period.
It wanted the officials concerned to remove some concerns of the people about rising inflation, oil price increases and continuing trade gap with a view to achieving the sustained GDP growth rate.
The sources said the prime minister had assured his economic managers that Rs8 trillion would be managed to achieve the growth and other physical targets contained in the Medium Term Development Framework (MTDF).
However, he asked the economic managers to keep the national economy under close scrutiny to minimise bad impacts of the international economic environment.
Out of the fixed investment of Rs7.3 trillion, 65 per cent will be coming from the private sector and 35 per cent from the public sector during 2005-10. This is an aggregate of fixed investment by federal, provincial and local governments and corporate and autonomous bodies. The bulk of the public investment takes place through the budgetary mechanism of the Public Sector Development Programme, which is pitched at above Rs2 trillion for the next five years.
It is said that raising national savings and investment is a prerequisite for a sustainable economic development. In the recent years, the country has been able to break out of the syndrome of 13 per cent savings rate that had persisted for many years in the past.
A little over 88 per cent of the total investment of Rs8 trillion will be financed by national savings. The balance will be arranged from external sources. Within the national savings, the largest source of financing is the household saving, which contributes to 62 per cent of total investment. It constitutes 71 per cent of the national savings.
The MTDF will focus on improving the avenues of household saving.
As the climate for private investment improves, corporate saving will also increase. Public saving will require efficient management of public sector enterprises, effective utilization of government expenditure and greater revenue mobilization efforts.
For achieving the envisaged high growth rates, more funds are required to be generated domestically. This entails adoption of an appropriate mix of policy measures in the area of revenue collection and reforms in the taxation system. This strategy will include broadening the tax base, creating uniformity in the tax laws, enlarging application of general sales tax, containing current expenditure and implementing an efficient system of user charges for public services.
According to the MTDF, the government revenues are expected to increase from 13 per cent of GDP in 2004-05 to 14.8 per cent in 2009-10. Tax reforms to expand tax net, plug tax loopholes and improve tax administration will be implemented by the CBR as part of the second generation reforms during the next five year period.
