NEC sets 7.2pc growth rate target; Rs520bn PSDP likely
By Khaleeq Kiani
ISLAMABAD, May 31: Amid forecasts of worsening energy shortage and deteriorating current account deficit next year, the National Economic Council at a meeting held on Thursday set economic growth rate target of 7.2 per cent. The development expenditure was forecast to be Rs520 billion for 2007-08.
The meeting was informed that energy demand and supply gap, ranging from 1,000 to 1500MW currently, was “expected to be about 2500MW” next year. The current account deficit was projected to deteriorate further to $8.1 billion, compared with current year’s $7.1 billion.
Trade deficit, too, was projected to rise to $10.6 billion, compared with current year’s estimated deficit of $9.9 billion.
Prime Minister Shaukat Aziz presided over the meeting which was attended by economic ministers and their secretaries, four chief ministers, NWFP governor and Azad Kashmir Prime Minister, besides provincial finance ministers.
Dr Akram Sheikh, deputy chairman of the Planning Commission, told reporters after the meeting that inflation in general and food inflation in particular “is a problem and needs a lot of effort”.
Planning Commission secretary Ziaur Rehman informed the meeting about challenges to the economy, particularly energy shortage, sustainability of economic policies, inflation, trade imbalances, governance, economic inequality and rural poverty.
The meeting was told that targets set for the current year like trade deficit, exports, imports, current account deficit, inflation, industrial production and large-scale manufacturing output could not be met. On the positive side, the GDP growth rate, agriculture and services performed better than targeted and inflows on account of foreign investment and remittances were higher than expected.
The next year’s 7.2 per cent GDP growth rate will be achieved on the basis of expected 4.8 per cent growth in agriculture, 9.4 per cent in industry and 7.1 per cent in services. Large-scale manufacturing, which significantly missed current year’s target, was estimated to grow by 12.5 per cent.
Cotton production for the next year has been estimated at 14.14 million bales, compared with 13 million bales this year, and wheat production target has been put at 24 million tons, compared with 23.52 million tons this year. Sugarcane production has been estimated to be higher at 55.9 million tons next year against 54.74 million tons this year. Rice output that failed to come up to expectations this year has been estimated at 5.7 million tons for the next year.
Investment to GDP ratio has been forecast to go up from 23 per cent (Rs2,004 billion) this year to 23.8 per cent next year (Rs2,382 billion). Of this, the Public Sector Development Programme expenditure at Rs520 billion will be 4.7 per cent of the GDP, compared with 4.1 per cent of the GDP this year.
The meeting put export target at $18.9 billion against current year’s expected outcome of $17.2 billion, much lower than $19.8 billion target. Imports, expected to be $27.1 billion this year against a target of $27.4 billion, are forecast to touch $29.5 billion next year.
The meeting was informed that about 98 per cent (Rs246 billion) of current year’s Rs250 billion federal PSDP would stand utilised by June 30.
The Rs520 billion PSDP 2007-08, approved by the NEC, includes Rs335 billion federal development programmes and Rs150 billion provincial programmes and Rs35 billion has been set aside for earthquake rehabilitation to be undertaken independently by the Earthquake Reconstruction and Rehabilitation Authority.
Dr Sheikh said public sector corporations like Wapda, NHA and the OGDCL would separately take in hand Rs204 billion worth of development schemes. In this way, next year’s total development outlay will cross Rs724 billion.
Of the federal PSDP share, the infrastructure sector will get Rs162.7 billion (48.6 per cent), social sector Rs159.4 billion (47.6 per cent) and others Rs12.9 billion or 3.8 per cent. On a whole, 84 per cent (Rs283 billion) of the total PSDP share will be consumed by more than 1,400 ongoing projects and 15.5 per cent (Rs52 billion) will be given to about 694 new projects.
Dr Akram Sheikh said next year’s allocation for water sector projects had been increased by 48 per cent over the current year and a block allocation of Rs40 billion had been made for major dams, adding that cabinet decisions on big dams would be implemented. He said construction of dams required $18 billion over a longer run at the rate of about $2 billion every year and a committee, led by adviser to the prime minister on finance Dr Salman Shah, would make separate plans to raise funds through special loans, special purpose vehicles and joint ventures.
He said the NEC had approved 33 per cent increase in allocations for the health sector to Rs15.9 billion, and increased education’s share from Rs5.8 billion to Rs6.5 billion next year. The Higher Education Commission would get Rs18 billion next year, compared with Rs14.3 billion this year, he said.
He said the NEC had also approved a draft “Vision 2030” that envisaged the size of the national economy to grow to $1 trillion, per capita income at current prices to cross $4,000, population growth rate to come down to one per cent and literacy rate to be 100 per cent by 2030. The purchasing power parity, he said, would also rise from current $2,500-2,700 to $10,000-12,000 by 2030.
