KARACHI, May 22: The government is tentatively targeting an economic growth rate of 5.3 per cent during 2003-04 based on expectations that manufacturing sector would grow by 7.8 per cent and agricultural growth would be 4.2 per cent.

In case this growth rate is achieved, Pakistan will, for the first time, exceed four trillion rupees gross domestic product mark next fiscal year. This fiscal year’s estimated GDP is Rs 3,681 billion.

Planners anticipate current fiscal year 02-03 ending with a growth rate close to five per cent mainly because of remarkable growth of over 10 per cent in large-scale manufacturing and a turnaround in agriculture where major crops like wheat, sugarcane and rice showed reasonably good output. In final counts agricultural growth in the current fiscal year may be 3.85 per cent.

“The economy has withstood the long drought phase and large scale manufacturing is coming out of the sluggish growth,” is the observation in an official position paper. But planners are uncertain whether the economic reforms have become ingrained in the system and they are skeptical whether recovery witnessed in 02-03 is sustainable.

Finance Minister Shaukat Aziz has repeatedly said recently that next budget would focus on growth of small and medium enterprises and construction industry would also get some preferential treatment. Banks and financial institutions are being geared to provide liberal credits to small and medium enterprises. Taxation policies are also being re-designed to give all incentives and concessions.

Planners now look for an overall industrial growth of 7.8 per cent in which large-scale manufacturing is likely to contribute 8.8 per cent and small scale manufacturing would show 5.3 per cent growth.

Hopes are pinned on sugar, petroleum products, chemicals, cement, cotton yarn, cotton cloth, railway coaches, locomotives, motor vehicles, engineering goods, air conditioners, cigarettes, motor tyres, fertilizer and a few electronic items like refrigerators, televisions and electric transformers to grow in terms of production, marketing and investment next fiscal year.

Improvement in water availability, water saving techniques and changes being made in cropping pattern has started showing encouraging results and planners expect major crops showing 5.5 per cent growth in 03-04. Fishing is expected to grow by 3.5 per cent, minor crops 3.5 percent, livestock 3 per cent, and forestry by 5.3 per cent.

A major breakthrough is expected from the steps being taken to create a hassle-free liberal business environment in the country. The government had set up a Task Force which is reported to have offered a set of recommendations which are now being implemented gradually. Planners hope that this hassle-free environment would encourage investment which is forecast to reach 16.9 per cent of the GDP as against 15.6 per cent estimated for the current fiscal year. Total investment projected for next fiscal year is Rs739.5 billion, which is 19.1 per cent higher over the level of Rs620.9 billion investment made in 02-03.

National savings is expected to be 16.9 per cent of the GDP and would entirely finance the investment.

Against an expected surplus of 2.68 billion dollars in the current account balance in 02-03, the planners foresee a decline to 5 million dollars in the coming fiscal year because of expansion in trade deficit, a slow down in remittances to 3.6 billion dollars.

A spurt in economic activities is expected to push up import bill next fiscal year and hence a deterioration in the balance of payment during 03-04. Trade account deficit during next fiscal year is tentatively being estimated at around 1.23 billion dollars against a deficit of one billion dollars expected in the current fiscal year.

Fiscal policy will remain consistent to bring down budget below 4 per cent. A proposed PSDP of Rs152 billion is expected to create some demand for industry and services in the market and contribute in poverty alleviation.