PHOTO: EXPRESS
ISLAMABAD: The National Economic Council (NEC) on Friday approved the new financial year’s economic framework on rosy assumptions while setting aside a relatively realistic picture painted by the Ministry of Planning and also endorsed a Rs2.5-trillion national development outlay for public investment.
The NEC did not approve next year’s current account deficit target of $10.4 billion, which was equivalent to 3.1% of gross domestic product (GDP), after the finance ministry gave assurances to the council that it would curtail imports and enhance exports.
Prime Minister Nawaz Sharif chaired the meeting of NEC - a constitutional body with mandate to approve the macroeconomic framework and national development budgets. The NEC also approved the special PM Initiatives of Energy for All and Clean Drinking Water for All in addition to allocating Rs180 billion for the China-Pakistan Economic Corridor (CPEC) projects.
It asked the planning ministry to revisit its prepared macroeconomic framework in light of the assurances given by the finance minister to Prime Minister Nawaz Sharif. The Ministry of Finance managed to convince the premier that the planning ministry’s projections about imports, exports and current account deficit should be readjusted.
Budget plans
After taking into account the finance ministry’s observations, the next fiscal year’s current account deficit target has been restricted to $8.9 billion or 2.6% of GDP, said sources. The import target has also been cut to $48.8 billion from $50 billion.
In order to curtail imports, the NEC was informed that the Federal Board of Revenue would impose regulatory duties on goods import and increase customs duty on all slabs. But the planning ministry was of the view that additional duties may not restrict imports, as there were many goods that were price inelastic.
Finance Minister Ishaq Dar insisted that he would provide all the requisite financial resources to enhance exports in the next fiscal year. Punjab Chief Minister Shahbaz Sharif complained that the federal finance ministry was not clearing duty drawback claims of exporters, which was nullifying the positive impact of the Rs180-billion PM’s textile package. However, Dar assured the CM that his ministry would provide needed resources in the new budget.
The NEC also approved next financial year’s GDP growth target at 6% and inflation goal at 6%.
The planning ministry also highlighted the risks to next year’s economic outlook, stemming from the expansion in fiscal policies.
Sources said the ministry was of the view that growth targets were subject to risks such as extreme weather conditions, interruption in economic reforms and non-alignment of monetary and fiscal policies. A major concern was that the government would adopt an expansionary fiscal policy due to upcoming elections. Sources said the finance ministry was the main beneficiary of the easy monetary policy. Resultantly, there was little left for the private sector to borrow for expansion.
Development outlay
The NEC approved Rs2.5 trillion national development outlay for the next fiscal year including roughly Rs400 billion that corporations would spend outside the federal and provincial budgets, said Ahsan Iqbal, Minister for Planning and Development while speaking to media.
He said the federal PSDP was set at Rs1.001 trillion while provincial development budgets would stand at Rs1.112 trillion. Corporations will spend Rs394 billion by arranging funds on the strength of their balance sheets. The minister said the infrastructure sector had been given 67% of the development budget and Rs411 billion has been provided for transport and communication.
The National Highway Authority will get Rs324 billion, Pakistan Railways Rs43 billion and other projects Rs44 billion.
The energy sector has been given Rs404 billion including Rs87 billion that will be spent from the budget. The Water and Power Development Authority, National Transmission and Despatch Company and power generation companies will spend Rs317 billion from their own resources.
An amount of Rs180 billion has been given for completing CPEC projects. As many as 37 projects of Gwadar have been made part of the next year’s development programme and Rs137 billion has been proposed for construction work.
Iqbal said the federal government was paying special attention to ensuring water security in Balochistan. For this purpose, Rs17 billion has been proposed for various small projects and the Kachhi Canal.
For fast-track development in Fata, AJK and G-B, Rs65 billion has been proposed. The minister said the social sector would get Rs153 billion next year. This includes Rs57 billion for health and population services and Rs35 billion for higher education.
The next year’s budget includes two new special initiatives of the prime minister -Energy for All worth Rs12.5 billion and Clean Drinking Water for All costing Rs12.5 billion.
Published in The Express Tribune, May 20th, 2017.
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