ISLAMABAD: The government is targeting an average economic growth rate of 5.8 per cent — the departing rate of the last government — over the next five years of its term amid poor showing of the agriculture sector next year.
This is part of the 12th five-year plan currently being finalised by the Planning Commission and discussed at a meeting presided over by Minister for Planning, Development and Reforms Khusro Bakhtyar.
“The plan aims at achieving 5.8pc GDP growth on average during the plan period 2018-23,” the meeting was told and explained that this growth had been projected on the basis of 3.6pc growth in agriculture, 6.1pc in industry and 6.8pc in services sector on average during the plan period.
Planning Commission is finalising 12th five-year plan
The draft five-year plan was approved in principle by the National Economic Council in April last year under then prime minister Shahid Khaqan Abbasi with the condition that it should be vetted by the next government before its formal launch. The draft targeted GDP to grow by 6.2pc in 2018-19 with 3.8pc contribution from agriculture, 7.6pc from industry and 6.5pc from services.
A senior government official said the growth rate target for the current financial year had already been revised downwards significantly from 6.2pc to 4.2pc owing to a series of factors. These included a policy of fiscal consolidation adopted by the current government because of higher than anticipated fiscal deficit on the conclusion of last fiscal year, downturn in agriculture and the expected programme of the International Monetary Fund (IMF).
The agriculture growth was already revised to 3.6pc on the back of a higher 3.8pc growth achieved last year but this has now been scaled down to 2.4pc. The major crops were now projected to show a decline of 0.8pc because of overall water shortage and shift in area under cultivation from sugarcane to other crops.
The official said the government had to revise almost all the targets because of ensuing higher fiscal deficit on the lack of decision making during a prolonged political transition. The path of consolidation meant the aggregate demand will reduce significantly. The farmers have been struggling over the past many months, they faced water shortages and could not secure reasonable prices for sugarcane and for wheat as well and faced higher input prices — fertiliser, energy to name a few.
This is expected to shift the area under cultivation from sugarcane to cotton and to minor crops to some extent. The bumper wheat crops of the past two years also had an impact on the overall return offered by the sector to the farmers and associated sectors. Since the manufacturing and transport is highly dependent on agriculture this would also affect industry and the services sector.
Officials said the government now expected that an enabling environment for investment would be created with better energy supplies and competitiveness would improve because of better energy prices offered by the new government in one to two years. During this period, SMEs were expected to perform well and coupled with planned structural reforms they may help revive the foreign direct investment (FDI) supported by investors from friendly countries like China, Saudi Arabia, Malaysia, the UAE and Qatar.
This would help generate greater exportable surpluses that would also be competitive in the international market. The participants were explained that consolidation period was expected to be over by the next financial year and GDP growth will start picking up from the current envisaged at 4.2pc to 7pc during terminal year of the five year plan. The meeting was apprised that the plan’s draft is ready which will be launched after the approval from the competent forum, an official statement said.
The officials said the draft had not been properly shared with the provinces at the time of its approval in principle. The meeting presided over by the planning minister decided that all stakeholders, particularly the provinces should be contacted for a broader consultation.
The minister asked the planning commission that the 12th five-year plan should contribute to real economic growth covering all aspects for attaining sustained economic growth. In line with the government’s vision, emphasis during the plan period would remain on social sectors, poverty alleviation, job creation and improvement of governance for ensuring transparency and overcoming corruption.
The IMF has already revised growth prospects downward saying the macroeconomic stability gains have been eroding, putting the outlook at risk. “Growth is expected to moderate to 4.0pc in 2019, and slow to about 3.0pc in the medium term – till 2023.”
Published in Dawn, January 8th, 2019