ISLAMABAD: The government is working on a plan to lower major economic targets for next financial year because of economic difficulties and transfer the responsibility of financing social sector projects to the provincial governments from the Public Sector Development Programme (PSDP).

According to sources, a major restructuring of the planning process is under way. “Not only the composition of the PSDP will change in the next budget but the Planning Commission will see induction of provincial members to represent their provinces in major policy formulation and development planning in accordance with the 18th Amendment,” they said.

Planning Commission Deputy Chairman Dr Nadeemul Haq’s ‘New Growth Framework (NGF)’ will, for the first time, become part of next year’s development budget and the 10th five-year plan. Mr Haq had shelved the 10th five-year plan two years ago to focus on changing the investment model.

“Starting with the next budget, the federal government will largely move out of the social sector and it will become the responsibility of the provinces. However, the centre will complete the ongoing schemes,” an official said. The NGF would become redundant if not made part of the five-year plan and the budget this year, he said.

He said that despite political compulsions, the size of next year’s federal PSDP would be around Rs350 billion, instead of Rs470 billion envisaged under the medium-term budgetary framework (MTBF) and budget strategy paper (BSP) introduced last year.

He did not rule out that owing to political pressures the size of the PSDP might be increased, but hastened to add that the economic managers would resist any unreasonable spending that might push up budget deficit now being targeted at 4.5 per cent of the GDP for next year.

Likewise, the provincial PSDPs will be of around Rs495 billion instead of Rs680 billion estimated earlier.

The overall size of the PSDP will hover around Rs850 billion instead of Rs1,150 billion earlier estimated for the next financial year and the development expenditure will be about 3.6 per cent of the GDP instead of five per cent estimated in the MTBF.

Officials said major macroeconomic targets for the next year envisaged in the MTBF had already become unrealistic and would be scaled down.

The economic (GDP) growth rate for the year is being estimated at five per cent, instead of 5.5 per cent, and the inflation target will be set at 10 per cent.

The target for tax revenue is being lowered to 10.7 per cent from 11.7 per cent and non-tax revenues by 0.2 percentage points to four per cent. The total revenue is estimated at 14.7 per cent instead of the earlier estimate of 15.9 per cent of GDP.

Officials said the existing composition of PSDP, including infrastructure, social sector, would be replaced by productive activities, infrastructure development, social development, special areas and special programmes. The NGF will focus on productivity enhancement, investment in software instead of hardware, competitiveness, domestic markets, new role for cities and entrepreneurship.

The Planning Commission argues that the government and quasi-public sector entities such as the armed forces, railways, Steel Mills and Karachi Port Trust own a disproportionately large portion of real estate in major urban centres. In Karachi, up to 94 per cent of available land is under the administrative and legal control of these entities, sparing very little land for commercial use and resulting in hiking its price to a point where development becomes commercially unfeasible.

Measures will be introduced to make large tracts of prime urban land available for commercial use through long-term lease and outright sale without recourse to the budget for investment in real estate development and commercial activities.

Attention will also be paid to improving the yield of major crops and small businesses.