ISLAMABAD, June 8: The National Economic Council here on Saturday approved Rs134 billion new Public Sector Development Programme for 2002-2003 that contains 40 per cent allocation for health, education and poverty alleviation.

The NEC also decided to considerably increase the defence budget in 2002-2003 due to growing tension in the region.

Later, briefing newsmen about the decisions of the NEC, presided over by President Gen Pervez Musharraf, Finance Minister Shaukat Aziz said that the meeting further decided to fix 4.5 per cent GDP growth target for the next financial year against 3.6 per cent of the current financial year.

He said 4 per cent GDP growth target for 2001-2002 had been revised to 3.3 per cent due to world recession and Sept 11 events of last year. “But finally we managed to have 3.6 per cent growth for the current fiscal year which is very encouraging compared to other countries of the region including India”, he claimed.

Asked why the NEC did not accept the recommendations of National Plan Coordination Committee (APCC) to have Rs144 billion PSDP, he said it was due to petroleum sector which has now been separated from the federal budget to be looked after by the Petroleum Holding Company that has recently been established.

Informed sources said that the representatives of the provinces complained that they were not being offered adequate funds. They also said that they have not been taken into confidence for undertaking various new projects. In this behalf, the finance and planning ministers of Sindh particularly mentioned Thal Canal project which was approved by the Executive Committee of the National Economic Council (ECNEC) without taking into confidence the officials of the provinces.

However, sources said that the president assured the provinces that from now onwards all the water projects will be approved with the consent of the provinces as well as on the recommendations of Indus River System Authority (IRSA).

Sources said that the meeting was told by the president that a list has been prepared for undertaking some of the development projects which will be initiated with the help of foreign grants to be offered by friendly countries. Another “wish list” of projects was also finalized subject to availability of funds.

Giving details about various economic indicators, the finance minister said that agriculture has registered 1.4 per cent growth against minus 2.5 per cent of 2000-2001. The overall manufacturing sector witnessed an increase of 4.4 per cent in 2001-2002 against the revised target of 3.8 per cent. Large scale manufacturing was 4.4 per cent against the revised target of 3.3 per cent. He said had there been no impact of drought, the GDP growth could have reached to 4.3 per cent.

The per capita income grew by 3.2 per cent and inflation remained 2.5 per cent which according to the finance minister was the lowest in three decades. “We expect that inflation will be below 4 per cent in 2002-2003”.

He said exports reached to $9bn against the target of $10bn due to cancellation of orders in the aftermath of Sept 11 events of last year. Furnishing the details, he said that export of cotton cloth was 12 per cent, beadwear 26 per cent, towels 17 per cent and readymade garments 23 per cent. He said there has been a significant improvement in the exports of value-added products.

Mr Aziz said that current account balance was surplus by $2bn due to $1.2bn foreign remittances received till the month of May this year. “The final figure of remittances is likely to reach to $2.2bn by June 30 this year”.

The foreign exchange reserves, he said, have reached to $5.6bn and would touch to $6bn by the end of the current financial year. He said foreign debt has reduced from $38bn to $36bn.

The finance minister said that the NEC has decided to allow the provinces to impose 2.5 per cent general sales tax to collect additional Rs30 to Rs32 billion to be spent on poverty alleviation.

Responding to a question he said that out of Rs134bn new PSDP, Rs23.7bn has been kept for water and power, Rs7bn for Railways and Rs15bn for roads and highways.

Banks’ interest rate, he said, has been reduced from 14 per cent to 12 per cent. He did not give the figure of budget deficit but said it was well under control. He also said there was no pressure on exchange rate and the banks have enough liquidity to lend.