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Govt eyes 4pc growth as development budget slashed for 2019-20

Updated May 23, 2019

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This is the crux of the budget preparations ahead of APCC meeting being held on Thursday. — Dawn/File
This is the crux of the budget preparations ahead of APCC meeting being held on Thursday. — Dawn/File

ISLAMABAD: The government has envisioned a subdued economic outlook for next fiscal year with gross domestic product forecast to grow by 4pc as the development programme comes under a virtual freeze.

This is the crux of the budget preparations ahead of Annual Plan Coordination Committee (APCC) meeting being held on Thursday after at least three postponements.

APCC is the first step for the country’s development and economic policy makers to set the agenda for next year’s economic and development agenda. Minister for Planning Mukhdum Khusro Bakhtiar will preside over the meeting to be attended by planning ministers for four provinces, AJK and Gilgit-Baltistan.

A senior government official said the GDP growth rate for 2019-20 has been estimated at 4pc (instead of provisional growth rate of 3.28pc this fiscal year), with a 3.7pc growth contribution from agriculture and about 2pc contribution from large-scale manufacturing.

The next year’s fiscal deficit target is being set at about 6.2pc of GDP compared to 7.3pc of GDP estimated for the current year. He, however, said the final numbers would be finalised early in the morning ahead of the APCC meeting.

These sources said the Secretary Planning had called a meeting of the top officials of the Ministry of Finance and the State Bank to finalise macroeconomic targets for the next year, but did not allow discussions after seeing very junior level representations from the two major stakeholders.

A message from the central bank was also delivered to the Planning Commission to keep growth targets on the downside to represent understandings reached with the International Monetary Fund under $6bn bailout package that is yet to be formally signed. The fund has not yet set a date to take up Pakistan case for approval.

Documents seen by Dawn suggest the next year’s Public Sector Development Programme (PSDP) will be kept unchanged at last year’s Rs675bn level. Even out of this an amount of Rs100bn would be set aside as block allocations under prime minister’s programmes to be financially administered by the finance ministry. As such, the core PSDP would come down to Rs575bn – almost unchanged at a level revised by the PTI government under its supplementary budget.

The country’s total development plan has been estimated at Rs1.837 trillion including cumulative provincial annual development plans of Rs912bn. To make a higher pitch, the government has estimated the PSDP at Rs925bn but this includes an unexplained block allocation of Rs250bn as ‘alternate financing’ and Rs199bn allocations to be financed by two corporations – National Highway Authority (NHA) (Rs157bn) and National Transmission & Desptach Company (NTDC)/Pakistan Electric Power Company (PEPCO) (Rs42.3bn).

Out of Rs100bn block allocations, Rs32.5bn each would be earmarked for security enhancement and settlement of displaced persons followed by Rs22bn for merged districts of tribal region into KP and Rs10bn for PM’s Youth Skill Development Programme. Rs2bn is being allocated for Clean Green Pakistan and Rs1bn for gas development projects.

All the federal ministries are being allocated Rs370bn of which the largest share of Rs85bn would go to water sector projects followed by Rs45bn to Kashmir Affairs and Gilgit-Baltistan and Rs37bn to the Ministry of Finance. About Rs32bn allocation would go to the Higher Education Commission while Pakistan Atomic Energy Commission would get Rs25bn.

Officials said the federal ministries and divisions had demanded about Rs1.5tr for development projects for next year but severe resource constraints forced the finance ministry to limit the PSDP at Rs675bn.

“A tight fiscal space led to decline in PSDP allocation for the next fiscal year as opposed to budget allocation for the current fiscal year”, the official said, adding the Planning Commission would request the prime minister to enhance allocations.

They said the development of backward areas would be given a preference in the PSDP projects with the purpose to bring them on a par with developed areas. The target would be to give priority to selected least developed 40 districts from the Balochistan, Khyber Pakhtunkhaw, Sindh and Southern Punjab and implement projects of road, water and other amenities.

However, priority allocation in the PSDP for the next fiscal year would remain infrastructure, water and security as the social sector development was more of a provincial responsibility. Completion of ongoing projects particularly those under the China Pakistan Economic Corridor, water sector and those nearing completion would be given top priority in the PSDP for 2019-20.

The PSDP for current year was originally approved at about Rs1.03tr which was later reduced to about Rs675bn by the PTI government in September 2018.

The development programme for the next fiscal year would run through National Economic Council (NEC) for final nod after approval from the APCC before being finally made part of the budget.

No date for the NEC meeting has been finalised.

Published in Dawn, May 23rd, 2019