KARACHI, June 12: The State Bank of Pakistan has suggested the government to accelerate the pace of public investment and “raise it by at least 20 per cent” in the forthcoming budget, compared to actual utilization in the current fiscal year, to strengthen the foundation for growth and to stimulate the economy.

“Given the fiscal space freed by debt-reprofiling and reduction in the government’s domestic borrowing cost due to lower interest rates, it is now possible to raise the level of public investment by at least 20 per cent,” stresses the SBP report for the third quarter of the year 2001-2002 released on Wednesday.

The SBP wants most of the public investment in the infrastructure and the social service sectors with particular attention to the district and municipal levels. “It is quite obvious by now, that for a variety of reasons, the private sector remains shy, as far as new investment is concerned,” and therefore the SBP’s stress on public investment.

This advice of the central bank, ironically comes in wake of the reports that the National Economic Council (NEC) in its meeting last Saturday slashed the public sector development programme (PSDP) from original Rs144 billion to Rs134 billion.

The Annual Plan Coordination Committee (APCC) in its meeting on May 28 has designed a PSDP of Rs144 billion, which was only Rs4 billion more than the revised PSDP of Rs140 billion for the current fiscal.

Under a new strategy, the federal government has shrugged off its responsibility to provide resources for Khushhal Pakistan projects, drought related assistance and for social sectors. Instead, the provinces and the district governments are being asked to take up all these responsibilities.

The SBP report puts the utilization development funds at Rs91.5 billion during the first nine months of 2001-02, which is more than Rs88.6 billion net target for the period. But then this amount includes Rs10 billion for drought related spending and Rs3 billion for fiscal devolution. Actual utilization, therefore, comes to about Rs78.5 billion for development activities.