• Led by PM, 13-member council aiming for 3.6pc economic growth rate
• Expected to consider 13th five-year plan, review performance of Ecnec, CDWP
• Planning ministry pushes to raise PSDP to Rs1.5tr against APCC-approved Rs1.22tr

ISLAMABAD: The newly constituted National Economic Council (NEC) is set to convene today (Monday) to review ongoing and future investments and set targets for the next fiscal year.

The council aims to achieve a 3.6 per cent growth rate amid the planning division’s push to increase next year’s federal Public Sector Development Pro­gramme to Rs1.5 trillion, against the Rs1.22tr recommended by the Annual Plan Coordination Committee (APCC) last week.

Led by Prime Minister Shehbaz Sharif, the highest constitutional forum on economic policymaking would take up a six-point agenda. The 13-member body also comprises four provincial chief ministers, four federal ministers (for foreign affairs, defence, finance, and planning) and four provincial cabinet members from the respective provinces.

The meeting would review the outcome of the 2023-24 macroeconomic framework and approve next year’s (2024-25) economic priorities and targets. It is also expected to consider the 13th five-year plan (2024-29) and approve it for implementation. The meeting would also review the implementation status of the current year’s public investment programme and approve the investment plan for the next fiscal year, envisaging almost Rs4tr development spending by the Centre and the provinces.

The APCC has cleared a national investment plan of about Rs2.869tr, including Rs1.22tr of PSDP, and annual development plans (ADPs) Rs700bn for Punjab, Rs763bn for Sindh, and Rs627bn for Khyber Pakhtunkhwa. Balochistan’s ADP would also be finalised during the NEC meeting, given its limited resources and high dependence on federal transfers.

Punjab has reportedly firmed up a much higher ADP than initially indicated, which could match the federal PSDP. The power sector would also be showing Rs185bn allocation for their development projects from their own resources generated from consumers under the approval of the Nepra. Therefore, the overall national development plan for the next fiscal year is expected to surpass Rs4tr.

Push for higher PSDP

The NEC is also expected to review the performance reports of the Executive Committee of the National Economic Council (Ecnec) and the Central Development Working Party (CDWP) for the outgoing fiscal year, including decisions taken by the two forums and their implementation. It will also consider a report on the performance of the state-owned entities.

Sources said the Ministry of Planning was still pushing for increasing the size of the 2024-25 PSDP to Rs1.5tr instead of Rs1.221tr approved by the APCC, which is headed by the Planning Commission’s Deputy Chairman Jehanzeb Khan.

The sources said some critical areas had been left out by the APCC and there were some additional demands from the coalition partners that the planning minister and the prime minister would likely accommodate.

“There’s nothing wrong in aiming for higher PSDP investment, though its implementation would depend on the actual resource availability during the course of the fiscal year,” a senior government official said.

Growth targets

The growth target for the next year has been proposed at 3.6pc, to be supported by 2pc growth in the agricultural sector, 4.4pc in the industrial sector, and 4.1pc in services. The growth prospects are subject to “political stability, exchange rate stability on the back improvement in external account and external inflows, macroeconomic stabilisation under IMF’s programme and expected fall in global oil and commodity prices”, the Planning Commission said.

The agricultural sector’s growth target of 2pc reflects a substantial contraction. The output of important crops is expected to face a contraction of 4.5pc due to a severe dry weather spell and inadequate water availability due to lower than normal rainfall, especially in the case of kharif crops. Other crops and livestock sub-sectors are envisaged to grow at 4.3pc and 3.8pc, respectively.

The industrial sector is expected to recover in 2023-24, with a targeted growth of 4.4pc on the back of expected large-scale manufacturing (LSM) growth of 3.5pc.

This is expected to get boost from improved inputs and energy supplies on the back of anticipated fall in global oil and commodity prices, further easing of import restrictions, higher public sector expenditure, stability in exchange rate and a decline in interest rates. Owing to these factors, prices of construction materials are expected to fall, which will support the construction industry to achieve a growth target of 5.5pc in 2024-25.

The services sector is also expected to grow by 4.1pc. The envisaged growth of 3.1pc in commodity producing sectors will complement the targeted growth in the services sector. Uptick of economic activity in the industry, especially the manufacturing sector, will largely translate into a better growth in the wholesale and retail trade, transport, storage and communications, etc.

The total investment-to-GDP ratio is expected to increase from 13.1pc in 2023-24 to 14.2pc in 2024-25 due to expected economic turnout, improved business environment and political stability.

Fixed investment is expected to grow by 27.6pc on a nominal basis, whereas as a percentage of GDP, it is expected to increase from 11.4pc in 2023-24 to 12.5pc in 2024-25. National savings are targeted at 13.3pc of GDP for 2024-25 against 13pc this year.

The government expects the fiscal deficit to narrow down on the back of fiscal consolidation measures with a focus on enhancing tax revenue and curtailing non-development expenditures, including subsidies. The monetary policy will be aligned with the objectives of inflationary expectations and growth revival. With falling global inflation, domestic average inflation is expected to moderate to 12pc next year.

Published in Dawn, June 10th, 2024

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