Economic Council: Growth framework targeting 7% rise in economy approved

Govt’s role to be restricted to policy-making and regulation.

ISLAMABAD:

The National Economic Council (NEC) on Saturday approved a new growth framework, promising to convert the country from a security state into a welfare state by replacing a model ruined by strong government footprints in markets and bureaucratic red-tapism.

Prime Minister Syed Yousaf Raza Gilani has authorised the Planning Commission to devise an implementation plan over the next four months by taking into confidence the four provinces and relevant stakeholders, an official told The Express Tribune after the NEC meeting.

The federal cabinet on Friday approved seven million pounds (Rs984 million) of grant offered by the Department for International Development of England, which will be spent on implementing the growth strategy, the official added.

Earlier, the finance ministry had blocked the approval of the grant due to a tussle with the Planning Commission. The matter was referred to the Law Division which sent it for the cabinet’s approval.

The official said UK Minister for International Development Andrew Mitchell, during his upcoming visit to Islamabad in June, will sign the grant agreement. The World Bank will work as an administrator, he added.

“Due to flat per capita income and less-than-desired growth, poverty is on the rise in the country,” said Planning Commission Deputy Chairman Dr Nadeemul Haq, adding “the current model could not sustain a growth rate which could create jobs for the labour force growing at a rate of 3.6 per cent annually.”

“If Pakistan wants to achieve an average seven per cent growth to create jobs for new entrants in the market, it will have to implement the new growth strategy at any cost,” said Finance Minister Hafeez Shaikh.

He said under the new economic framework, the government’s role in economy will be redefined in order to restrict its functions to only policy-making and regulation and leaving management with the private sector.

Shaikh said professionalism and managerial improvement in the government working will also be ensured. “The strategy will ensure that the cities serve as an engine of growth and will be interlinked with the rest of the world,” he added.

Nadeemul Haq, who is the main architect of the framework, in his presentation to the NEC highlighted the flaws of the current growth model. The current growth strategy limits the best use of assets, revolves around large government role in businesses as evident from public sector enterprises and wants protectionism in markets.

Approval of new annual plan

The NEC also approved next year’s annual plan targeting a 4.2 per cent growth in national income and keeping inflation at 12 per cent. The government is expecting average inflation of 12 per cent and year-end inflation at eight per cent next year, said Haq.

In the outgoing year, growth remained at 2.4 per cent due to devastating floods, said Hafeez Shaikh. For the next fiscal year, the government has estimated a 3.4 per cent growth in the agriculture sector, led by four per cent growth in livestock and three per cent in major crops. In the outgoing financial year, the agriculture sector – affected the most by the floods – grew by 1.2 per cent against the target of 3.8 per cent.

For the industrial sector, the NEC approved a 3.1 per cent growth against negative 0.1 per cent growth this year. For manufacturing, a 3.7 per cent growth rate has been fixed against the current growth of three per cent. The large-scale manufacturing sector is expected to grow by two per cent, small scale seven per cent, construction 2.5 per cent and electricity, gas and water supply one per cent.

For the services sector, the NEC approved a 5.1 per cent growth target against 4.1 per cent in the outgoing year. The push is expected to come from social, community and personal services with a 7.5 per cent growth, transport, storage and communications 4.8 per cent, wholesale and retail trade 5.2 per cent and public administration and defence five per cent.

Published in The Express Tribune, May 29^th, 2011.