Investment to GDP ratio may rise to 22.8pc: Target for five years
Minister of state for finance Omar Ayyub Khan presented a draft summary of the poverty reduction strategy paper (PRSP-II) to the participants of the Pakistan Development Forum that included foreign diplomatic corps based in Islamabad and multilaterals, like the World Bank and the Asian Development Bank.
The PRSP-II would be finalised in July after incorporating input form development partners.
The future economic policy would revolve round this document that has focus on unleashing demographic dividend through skill development and knowledge-based economy.
The draft PRSP-II forecasts that the inflationary pressure will be 6.5 per cent during 2006-07, 5.5 per cent in 2007-08 and will remain five per cent in the coming years till 2010-11.
“Challenges are several, but there are opportunities as well,’’ he said and added that the proposed growth would be driven by agriculture, services, infrastructure, manufacturing and development of big cities.
“This will lead to elimination of core poverty by 2015, which is defined as people with less than $1 a day earnings.”
He said Pakistan has made a remarkable progress in its economic performance, undertaken wide-ranging structural reforms, achieved both macroeconomic stability and strong growth and sharply reduced poverty but the government was cognizant of the fact that there was no room for complacency.
“The government estimates the economy will grow by seven per cent this year, compared with 6.6 per cent of the last year. The spending on poor would be increased from 5.6 per cent now to 6.2 per cent of the GDP by 2009.
“The population living in poverty reduced to 24 per cent in 2005 from 34 per cent in 2001, helped by an average seven per cent growth in the past four years,” he said.
Agriculture sector has been targeted to grow an annual 4.5 per cent for the next five years under the PRSP-II. The government will build road, rail and airports to link the country's ports with industrial cities, reducing transportation cost and time as part of infrastructure development, says the PRSP.
Mr Ayyub said the ratio of investment to GDP was expected to rise to 22.8 per cent by 2011 and per capita income is estimated at $1,253 in four years, from current 20 per cent and $847 respectively. The budget deficit has also been forecast to be reduced to 3.3 per cent from current 4.2 per cent.
Pakistan’s tax revenue is expected to grow up to Rs1.065 trillion in 2007-08, Rs1.255 trillion in 2008-09, Rs1.469 trillion in 2009-2010, and 1.722 trillion in 2010-11.
There will be a total expenditure of Rs2.601 trillion by 2010-11 against total revenues of Rs2.125 trillion.
The development expenditure will be jacked up to Rs479.5 billion in 2007-08, Rs556.8 billion in 2008-09, Rs655.2 billion in 2009-10 and Rs770.9 billion in 2010-11. The government will increase spending on the poor to 6.2 per cent of the GDP by 2009 from the current 5.6 per cent, it said.
The diplomatic representative of Norway in her presentation asked Pakistan to get ownership of National Assembly and provincial assemblies on this crucial PRSP-II document.
She also said that the consultative process held in preparation of PRSP did not reflect in the presented draft report. Advisor to Prime Minister on Finance Dr Salman Shah said that inequalities increased in Pakistan with the higher growth rate, but it was less than China and many other countries.
He said the increase in per capita income also posed certain challenges to Pakistan.
Mr Asim Baksh from Karim Baksh Ltd in his presentation said the prime minister has talked about per capita income touching $1000 but that meant the people will come out with money in their hands, but they would not find out space to buy things.