Amid the boycott by two provincial chief ministers, the National Economic Council (NEC) on Thursday approved Rs873 billion for development spending in next financial year, which is higher by Rs186 billion or 27% over expected expenses on development projects this year.
Headed by Prime Minister Yousaf Raza Gilani, the NEC also approved 4.3% economic growth target, which is envisaged to be achieved through improvement in productivity, competitiveness and initiating reforms that seem to be challenging in an election year.
The council also set an ambitious target to bring inflation into a single digit at 9.5%, though independent economists expected it to remain in double digits for the sixth consecutive year because of loose fiscal and monetary policies to be pursued by the government to lure voters. In the current fiscal year ending June 30, inflation is projected to stand at 11%.
Registering his protest, Balochistan Chief Minister Nawab Aslam Raisani boycotted the meeting on the grounds that the central government had not fully released the approved development budget for two consecutive years. Punjab Chief Minister Shahbaz Sharif also stayed away from the meeting, a key gathering that approved next year’s economic framework.
Sharif and his Pakistan Muslim League-Nawaz (PML-N) consider Prime Minister Gilani and his cabinet illegal after the apex court convicted the PM for disobeying the court’s orders. However, Sharif sent Senator Ishaq Dar to attend the meeting.
NEC sanctioned Rs360 billion for federal development projects, which is Rs60 billion or 20% higher than the budget for the outgoing fiscal year. This amount will be spent on 1,044 projects – 97% on 972 ongoing schemes and 3% on 72 new schemes. The Centre will obtain Rs100 billion in foreign loans for 80 projects, most of these – 42 – are pertaining to power production.
For water projects, Rs48 billion was sanctioned, for energy sector Rs184 billion, railways Rs23 billion, roads Rs59 billion, education Rs20 billion and health and population Rs24 billion.
However, the NEC drastically slashed allocation for land acquisition for Diamer-Basha Dam, earmarking only Rs8 billion against Planning Commission’s recommendation for Rs22 billion. This may create problems in negotiating a loan with the Asian Development Bank.
An amount of Rs35 billion was allocated for Chashma Nuclear Power Plants III and IV. “The allocation was increased after intervention from the military establishment,” said a finance ministry official. For Neelum-Jhelum Hydropower Project, Rs27 billion was earmarked while Rs3 billion was approved for Safe City Islamabad Project.
ADPs of provinces
For annual development plans of provinces, the NEC approved Rs513 billion, which is Rs126 billion or almost 33% more than the expected development expenses this year. For the outgoing fiscal year, an amount of Rs430 billion had been approved for the provinces, but they expected the expenditure to remain at Rs387 billion.
Next year, Punjab will spend Rs206 billion, Sindh Rs188 billion, Khyber-Pakhtunkhwa Rs78 billion and Balochistan Rs41 billion.
Economic framework
NEC was briefed that in the current fiscal year almost all economic targets including economic growth, investment, savings, exports and imports will be missed. As a result, both the budget deficit – difference between revenues and expenditures – and current account deficit – gap between external receipts and payments – will stay higher than the targets fuelling inflation, weakening rupee and depleting foreign currency reserves.
In the next year, the agricultural sector is expected to grow by 4%, manufacturing 4.1% and services 4.6%. As against this year’s economic size of Rs20.7 trillion, the economy will grow to Rs23.6 trillion.
Investment is expected to grow to 13.1% of total size of economy against current year’s 12.5%, the lowest in the country’s history. The target for savings is 11.2% compared to 10.8%, also the history’s lowest.
Export target stands at $25.8 billion, only $500 million higher than this year’s original target and $1 billion higher than expected exports. Imports are projected to grow to $42.9 billion, $4.9 billion higher than this year’s original forecast and $2.7 billion higher from revised projection.
Published in The Express Tribune, May 25th, 2012.
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The Biggest Joke of the century. Visonless Finance Minister who can not see in to the state of his cofers and is presenting a totally unachievable plan.