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10 years development plan

The best hope lies in institutional reform and restructuring of the existing system of governance

From Shamim Ahmed Rizvi,
June 18 - 24, 2001

The National Economic Council (NEC) in its 2-day meetings, in Islamabad last week, approved 2 development programmes, 3 years short-term plan (2001-2004) and a long-term 10 years programme covering the period between 2001-2011. The meeting presided over by the Chief Executive Gen. Pervez Musharraf also lifted moratorium imposed earlier by the NEC on processing new projects.

The 3-year Development Programme (2001-2004) includes total Public Sector Development Programme (PDSP) of Rs. 460 billion and 10 year allocation (2001-2011) of Rs. 2450 billion. The meeting discussed 8 sectoral strategies and programmes including water resources, Agriculture, Transport, Communication, Energy, information technology, Science and technology, Social sector and physical planning and housing. The 3-year plan will be part of overall 10-year development strategy.

After the meeting of National Economic Council, Deputy Chairman Planning Commission Shahid Amjad Chaudhary, and secretary Planning Division Muttawkal Kazi told pressmen that the objectives of the 2 plans are to accelerate economic growth, reduce unemployment and resultantly minimize poverty. The growth will be financed through donors as well as domestic resources. Forty per cent of development projects would be financed through foreign assistance and 60 per cent by domestic resources.

The other objectives are that the private sector should play a vital role in export-led growth; enhance competitiveness by improving the productivity and quality of exportable goods; the country should build a strong base for long-term self-sustaining growth and institutionalize social capita for sustainable development.

During the 3-year period GDP growth rate is estimated at 5 per cent an average. Trade deficit would be reduced to 6 billion dollars in 2003-2004 from over 1.5 billion estimated during the current financial year, development expenditure to 4.1 per cent of GDP from 2 per cent in 2000-2001.

Revival of the economy and regeneration of the growth process, productivity enhancement, job creation for unemployed and poverty reduction is the main thrust of the programme. The planning division prepared three year development programme for 2000-03 in September last year to maintain economic stability by containing fiscal and current account deficits and inflation growth, reduce poverty on a sustained basis and achieve increasing self-reliance. The main targets like GDP, Agriculture, fiscal deficit, and development expenditure and manufacturing has almost been revised and reduced in the proposed new three Year Development programme 2001-04 as protected in the previous three years programme 2000-2003.

The driving force behind the macroeconomics framework for 2001-04 is to focus policy and resources on lifting the economy by its own bootstraps. Its successful implementation will reinforce national economic independence by eliminating the need to access extraordinary external resources (including those from IMF) and by the boosting national morale in general and business confidence in particular

The programme will lay down the basis for sustained economic growth by reducing fiscal deficit from 5.2 per cent of GDP in 2001 to 3 per cent in 2003-04. This will be accomplished by increasing revenue rather than reducing development expenditures. Revenues will go up by about Rs. 100 billion each year beyond the base year target of Rs. 585 billion. Development expenditures has been planned to rise from 3.3 per cent of GDP (Rs. 115 billion) to 4.1 per cent of GDP (Rs. 193 billion). The external account deficit will go down from 20 per cent of GDP in 2000-01 ($1.2billion) to 0.8 per cent in 2003-04 ($0.65 billion). Trade deficit will be reduced from $ 1.3 billion to 0.6 billion, which will require a steady growth of 10 per cent per annum. External and internal debt levels will be stabilised through accelerated privatization, by securing improved terms with the creditors, and by cutting unnecessary current expenditure. A gas-led energy development strategy is being put in place to reduce the country's dependence on imported fuels.

The national savings rate is envisaged to increase from 13.5 per cent of GDP in 2001 to 16.2 per cent in 2004, which will help in reducing dependence on external resources. The 2001-04 macroeconomic framework call for strong fiscal adjustment while the balance of payment takes into account a possible funding arrangement with the IMF including rescheduling in the context of its Poverty Reduction and Growth Facility. However, if the $ 4 billion programme of privatization proceeds as planned and direct purchases in the market continue at the present level, a fall-back position exists with regard to the balance of payments, said the planning commission in the draft programme.

In accordance with the policy objectives embodied in the 2001-04 macro framework, the development expenditures would grow at about 19 per cent per annum. Out of a three-year total of Rs. 492 billion, Rs. 294 billion will be utilized by the Federal Ministries, Rs. 25 billion has been allocated for special Areas and Special Programmes and Rs. 173 billion has been kept for the provinces. The allocation takes into accounts the requirements of on-going schemes and attempt to provide space for new schemes.

The new initiatives of poverty reduction and information technology claim 18 per cent of the budgetary outlays, transport and communication gets 14.5 per cent, energy 12 per cent and water resources 11 per cent. Most important would be launching of major projects in the provinces by the federal government.

To achieve the agriculture growth target of 4 per cent per annum, availability of improved seeds, fertilizers, credit and other inputs especially water to farmers will be ensured. Fifty per cent of additional water would be utilised for increasing cropping intensity. Special wheat, oil seeds and pulses promotion programme will be initiated to broaden the agriculture base and to reduce import of these items.

Manufacturing sector is expected to grow at the rate of 5.9 per cent per annum, with the large-scale manufacturing growth fixed at 6.2 per cent. The sector would be strengthened with export orientation. Emphasis would be on development of Small and Medium Enterprises.

Over the next three years, it has been planned to increase gas production from 2722 mmcfd in 2000-01 to 3200 mmcfd in 2003-04. Electricity generation has been planned to increase by 14.4 per cent, increasing the installed capacity from 17710 mw in 2000-01 to 19052 mw in 2003-04, showing an average annual increase of 4.6 per cent.

The emphasis on maintaining realistic growth and stable prices (average annual inflation rate of 5.2 per cent) will help reduce poverty by increasing income per capita from Rs. 24,359 ($ 420) to Rs. 26,941 ($ 465) in constant 2001 prices. Increasing the investment rate from 15.5 per cent to 17 per cent will create 2.5 million new jobs, the best means of reducing poverty and empowering people.

Services sector as a whole is planned to grow at an average rate of 5.1 per cent per annum. The main contributors of value addition in this sector are transport and communication and trade.

During 2001-04, human development will advance side by side with economic growth and development. The percentage of population unable to secure minimum necessary 2150 calories per day will be brought down form 30 to 25 per cent and the human poverty index will improve from 44 to 35 per cent.

In education, the most important target is to significantly enhance female literacy rate from 39 to 47 per cent, primary school enrollment from 83 to 94 per cent, elementary school enrollment from 57 to 66 per cent. The number of scientists and engineering per thousands population will be raised from 116 to 295.

Around 75 per cent of the reform in civil services, judiciary, police, local governance, education as well as economic and financial governance will be implemented by 2001-04. The governance issues are multidimensional yet their resolution does not require significant financial resources, says the draft.

The Planning Commission observed that poor governance basically leads to inefficient utilization and distribution of resources, and the purpose of good economic management is always focused on maximization of returns and reduction of cost. Not only that good governance leads to economic gains but also increase public satisfaction as well as give its civil society a sense of participation. It also reduces distribution cost of social and economic services. In the context of Pakistan, which has been suffering from inefficient and corrupt practices of the past, declining rates of growth in the economy, rising unemployment and acute shortage of internal and external finances, the best hope lies in institutional reform and restructuring of the existing system of governance.