ISLAMABAD, March 12: The government has significantly lowered economic growth forecasts made in the annual plan of the federal budget for 2005-06 because of lower than expected growth in agriculture and manufacturing sectors.

Subsequently, the government had revised the estimated GDP (gross domestic product) growth rate down to 6.2-6.4 per cent during 2005-06, instead of the budgetary target of seven per cent, a senior government official told Dawn.

A few days ago, the revised estimates was approved by the National Economic Council under the prime minister on the basis of mid-year review by relevant government agencies. The official said that the final growth rate might be even lower. Services sector is the only major segment of national economy that is likely to meet its budgetary target of 6.8 per cent.

The annual plan had forecast the GDP growth at 7 per cent by projecting 4.8 per cent growth in agriculture, 9.5 per cent in industrial manufacturing and 6.8 per cent in services sectors. However, the agriculture sector’s growth estimate has now been revised to 3 per cent while the estimate for industrial sector’s growth has been put at 9.0 per cent.

Major crops had been projected to grow at 6.6 per cent but the estimate were reduced to 1.9 per cent mainly because of lower than targeted production of cotton and sugarcane.

Similarly, the large- scale manufacturing was originally estimated to grow at 13 per cent but it has now been revised to 12 per cent. “Even this 12 per cent growth is disputed,” said the official, adding that the growth of cotton yarn needed to be verified.

He said the services sector was also showing negative tendencies but would be offset by earthquake-related activities, including a significant increase in the volume of exports and imports and unprecedented inflows of foreign private investment. As a result, “services sector growth rate is estimated to maintain 6.8 per cent target,” he said.

Informed sources said the 6.4 per cent GDP growth had been estimated on the basis of 12 per cent growth of large-scale manufacturing but there were strong indications that the growth might be just 10 per cent, reducing the GDP growth rate to 6.2 per cent.

According to the Planning Commission, the GDP growth was running below target and inflation was higher than the targeted rate. It said that while export growth was impressive but the rate of increase in imports was even larger, which could lead to a huge trade deficit.

These sources said the government’s target for borrowing for budget financing had already exceeded the full year’s target in just six months, which showed a massive widening of gap between revenue and expenditure.

The borrowing for budget financing from July to January 21 stood at Rs109 billion against the annual credit plan of Rs98 billion, showing the pressure on the fiscal situation.