ISLAMABAD, March 17: The National Economic Council (NEC) will discuss the rising inflation, poor exports, slow down in imports and the widening current account deficit when it meets here on March 22.
The summary for the NEC obtained by Dawn on Saturday also projected 7.5-8 per cent GDP growth for 2007-08 due to what it claimed strong pick up in domestic and foreign direct investment and strong performance of agriculture, manufacturing and service sectors.
"The prospects for sustained high economic growth in 2007-08 would remain excellent," the summary asserted.
The NEC to be presided over by Prime Minister Shaukat Aziz is the highest body on economic decision making and its agenda for the meeting includes, mid-year review (July-December, 2006) of Medium Term Development Framework 2005-10, mid-year review of Public Sector Development Programme (PSDP) 2006-07, monitoring of projects of PSDP and working draft of Vision-2030.
According to the summary for the NEC meeting, the GDP growth for 2005-06, provisionally assessed at 6.6 per cent, is likely to go up to about 7 per cent in the revised estimates. GDP growth for the current fiscal year is expected to be 7 per cent as per Annual Plan target.
"Strict vigilance needs to be kept on money expansion to contain inflation to the annual target," the summary said adding that the major taxes collected by CBR showed a comfortable position on government revenues and on the basis it is expected that the full year revenue target would be achieved.
The trade gap though has been widened to higher level but foreign inflows also recorded equally similar growth to bridge the gap. Remittances and foreign direct investment around $6 billion in the first seven months of 2006-07, would offset the impact of rising trade gap, the summary finalised by the Planning Commission said.
"The only disturbing aspect of the current year's performance is export growth, which needs to be closely analysed to redress its problems, as this is an important driving force of the country's economy, having impact on the overall economic performance," the summary warned.
In this regard, it said that Pakistan's first export plan to increase exports to 15 per cent of GDP from current level of 12-13 per cent by 2013 has been conceived proposing ways and means to accelerate the pace of exports growth.
The summary also conceded that slowdown has been witnessed in import growth, especially those related to production and export processing, which are textile machinery and iron and steel.
"Current account deficit is likely to surpass the Annual Plan target of $6.3 billion, as it has already amounted to $4.4 billion during July-December 2006". GDP growth for the year 2006-07 is estimated to be 7 per cent on the basis of preliminary assessment of agriculture growth, large scale manufacturing (LSM) data for July-September 2006 and imports data for July-January 2006-07. The secretary Minfal had informed the ECNEC on March 7 that because of bumper crop and accelerated livestock production the agriculture sector would grow by 5 per cent against the Annual Plan target of 4.5 per cent in 2006-07.
The summary said that during July-December 2006-07, the large scale manufacturing items which have registered significant growth in production volume are air-conditioners (218.4 percent), switch gears (132 percent), match (39 percent), motor tubes (24 percent), paints & varnishes (22.8 percent), steel products (14.5 percent), cotton cloth (14.3 percent), cotton yarn (13.3 percent), caustic soda (12.4 percent), jeep & cars (12.7 percent) and tractors (7.4 percent).
At present, among the various sub-sectors of services, the only sub-sector for which revised estimate could be formed is wholesale and retail trade. Based on the value added in agriculture, manufacturing and import volume, this sub-sector has been assessed to grow by 7.2 per cent compared to the Annual Plan target of 8.8. per cent in 2006-07.
Taking into account the growth objectives, containing inflation and likely behaviour in the external sector, the Credit Plan for the 2006-07 envisaged 13.46 per cent increase in money supply. This was based on GDP growth target of 7 per cent and inflation rate target of 6.5 per cent. Net domestic assets were estimated to grow by Rs450.1 billion or 13.2 per cent. Credit Plan target for the private sector was set at Rs390 billion. "The net foreign assets of the banking sector system were envisaged to exert an expansionary effect to the tune of Rs9.8 billion".
Monetary expansion during the period July- February 2006-07 (up to 10-02-2007), the summary said, stood at Rs242.3 billion (7.09 per cent) compared with Rs240.4 billion (8.1 per cent) in the same period last year.
The government borrowing for budgetary support at Rs59.4 billion has been 49.5 per cent of the Credit Plan target. Demand for the private sector credit amounted to Rs227.4 billion as against Rs283.4 billion during the corresponding period of last year. Expansion in credit to private sector is 58.3 per cent of the annual target.
The balance of payment projections for MTDF have been made keeping in view the long term objectives of reducing the external dependency by increasing those sources of external financing that are stable, sustainable and have positive effects on growth. The main element of strategy is diversification of exports, stable exchange rate, export competitiveness and trade liberalisation.
The rate of inflation (CPI) for the year 2006-07 was targeted at 6.5 per cent. On the basis of July-January 2006-07, the annualised rate of inflation as measured by CPI stood at 8.14 per cent as against 8.48 per cent during the corresponding period last year.About the fiscal development it said that fiscal policy reiterates government's commitment to create an enabling macro economic environment and achieve the fiscal consolidation.