National Econo­mic Council sets economic growth target at 3.5pc

Published June 7, 2023
Prime Minister Shehbaz Sharif chairs meeting of the National Economic Council in Islamabad on Tuesday, June 6. — PID
Prime Minister Shehbaz Sharif chairs meeting of the National Economic Council in Islamabad on Tuesday, June 6. — PID

• Forum told population growth has hit 3.6pc, making Pakistan fastest-growing country in world
• Exports target set at $30bn, average inflation projected to come down to 21pc next year
• National development budget fixed at Rs2.7tr

ISLAMABAD: Accommodating the demands of the coalition partners, the PML-N-led National Econo­mic Council (NEC) on Tuesday tentatively approved an overall development budget of Rs2.709 trillion, almost 24 per cent higher than the current year’s budget estimates of Rs2.19tr.

This includes a federal public sector development programme (PSDP) of Rs1.15tr, including Rs200bn for public-private partnership and cumulative provincial annual development plans of about Rs1.159tr.

With this public sector investment in mind, the NEC — the country’s highest forum of the federation on economic decision-making — set a GDP growth target of 3.5pc for next year from a paltry 0.3pc this year against a budget target of 5pc.

It was disclosed for the first time before the council that Pakistan’s population growth, according to the latest census stood at 3.6pc, making it the fastest-growing country in the world. With this rate, the participants were warned, the country’s population would go far beyond 340 million by 2035 —adding almost double the size of South Korea’s current population in 10 years.

The participants were informed that Pakistan would need at least 22pc investment-to-GDP ratio to meet the requirement of such a large population compared to the current ratio of 13.6pc.

The business as usual would take the country’s GDP to $570bn by 2035, with 40pc poverty. Therefore, the country required 6-8pc of annual GDP growth to make it a $1tr economy and keep poverty at around 15pc.

Therefore, a transformational plan would need to be taken in hand immediately with a focus on five E’s — exports, e-Pakistan, environment, energy and infrastructure, and equity and empowerment.

The GDP growth rate of 3.5pc next year would be achieved with a contribution of 3.6pc growth in the service sector, 3.5pc in agriculture and 3.4pc in industry. The target for exports has been set at $30bn and inflation has been projected to come down from an average of 29.2pc this year to about 21pc next year.

Briefing journalists after a marathon session of the NEC presided over by Prime Minister Shehbaz Sharif, Planning Minister Ahsan Iqbal said the national development outlay would go beyond Rs3tr as the caretakers in two provinces — Punjab and Khyber Pakhtunkhwa — had shared their estimates only for four months.

The provincial shares were expec­ted to go beyond Rs2tr once elected governments were in place later, he said.

Informed sources said the federal PSDP contained about Rs200bn development projects pushed over the last couple of days by the coalition partners. Particularly, the allocations for national highways had to be increased by about Rs60bn, to Rs161bn on the insistence of JUI-F to include a couple of road projects in its core constituencies.

This was reinforced when the Ministry of Planning said in its summary that on the recommendations of the Annual Plan Coordination Committee and approval of the prime minister, who also heads the NEC, the finance division had raised the size of PSDP 2023-24 from Rs900bn to Rs1,150bn, including Rs200bn of public-private partnerships or build–operate–transfer projects.

The core PSDP would be arranged through domestic resources of Rs875bn and Rs75bn foreign assistance.

The Punjab chief minister attended the meeting through a video link; the Balochistan chief minister abstained and the provincial minister for development attended the NEC meeting in his stead.

The provincial annual development plans worth Rs1.559tr would also include foreign assistance of Rs569bn. Of this, Punjab has pitched its development budget at Rs426bn, Sindh Rs617bn, KP Rs268, and Balochistan Rs248bn.

The overall national development plan of Rs2.709tr would include a foreign exchange component of Rs644bn, while the remaining Rs2.065tr would be arranged locally.

The GDP size is projected at Rs106tr next year compared to Rs85tr this year. The target of total investment for next year has been set at 15.1pc against 13.6pc this year, while national savings are anticipated to crawl up to 13.4pc from 12.6pc during the current fiscal year.

Some new initiatives of national significance have been proposed to boost productivity, innovations, exports, food and water security, enhance social and physical assets to address SDGs, 4RFs strategies (flood-related recovery) and 5Es plans. Around 54pc resources have been earmarked for ongoing projects under next year’s development budget.

Projects with 80pc plus expenditures have been funded on priority for completion by June 2024, while around 52pc of the total allocation has been proposed for the infrastructure sector to ensure modern infrastructure and to attract foreign direct investment.

Within infrastructure, the proposed allocation for transport and communication is Rs267bn (28pc of the total size), the water sector allocation is Rs100bn (11pc), the energy sector’s proposed allocation is Rs89bn (9pc of the total size), physical planning and housing proposed allocation is Rs43bn, i.e. 4pc of the total size.

The social sector share comes at Rs244bn (26pc), including education’s Rs82bn (9pc) and health’s Rs26bn (3pc). Besides, Rs90bn has been allocated for parliamentarian schemes under the SDGs achievement programme compared to Rs70bn allocated in the budget this year but gradually increased to Rs111bn.

For balanced regional development, Rs108bn has been allocated, including Rs57bn for merged districts of KP, Rs32.5bn for Azad Jammu and Kashmir, and Rs28.5bn for Gilgit-Baltistan. About Rs80bn has been allocated for about a dozen special programmes of the prime minister.

The NEC also approved 5Es framework aimed at turning around Pakistan to put it on a sustained growth trajectory.

Under e-Pakistan, the focus would be on harnessing the potential of IT and telecom exports through a knowledge-based economy by accelerating the digitisation ecosystem.

The environment and climate change head, which focuses on water and food security, seeks to address Pakistan’s vulnerability to climate change by prioritising institutional, legal, and policy objectives for mitigating its impact and building resilient infrastructure. The water sector has allocated Rs97bn to complete larger projects.

Energy and infrastructure — seeks to ensure secure, sustainable and affordable energy for all, including the industry and other development sectors, by putting a complete break on power generation through imported fuels and diversifying the energy mix by investing in renewable energy sources such as wind, solar, and hydropower.

Equity and empowerment is aimed at fostering inclusive economic growth to ensure accessible and high-quality health, education, and social protection services for all citizens.

Published in Dawn, June 7th, 2023

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