The National Economic Council, which met in Islamabad
under the chairmanship of Prime Minister, Mir Zafarullah Khan Jamali,
reviewed the Macroeconomic progress during the current fiscal year
specially the utilization of the funds under the Public Sector
Development Programme. Noting some improvement in the utilization, the
meeting however, felt that it was not up to mark and took important
decisions to facilitate and speed up the process.
While directing the Federal and Provincial
Governments to speed up fund releases to the concerned agencies and
ensure timely completion of development projects, the Prime Minister
also decided that allocations for development projects be made
non-lapsable for continuing 3 years to ensure effective utilization of
public funds. The NEC meeting was attended by Federal Ministers,
Provincial Chief Ministers, Provincial Finance Ministers, Finance
Secretaries and high-level officials of the federal and provincial
governments. The meeting was told that the government had released Rs.
70.4 billion out of total outlay of Rs. 160 billion for Public Sector
Development Programme (PSDP) while overall spending remained at Rs. 49.6
billion in the first half of current fiscal year. The federal and
provincial releases stood at 44 percent of total allocated amount of Rs.
160 billion for PSDP while spending remained at 31 percent in first six
The provincial governments have been blaming the
center for delay in development projects. But the development projects
are facing immense problems in the country and the current level of Rs.
49 billion spending in first six months show that government will not
able to utilize allocated PSDP of Rs. 160 billion in a proper manner. If
current level of spending maintains during the remaining months of the
current fiscal year, government would not be able to cross Rs. 120
billion by the end of ongoing financial year.
Briefing the newsmen after the meeting, the Finance
Minister Shaukat Aziz said that the government has also decided to
authorize provincial government for spending upto Rs. 1 billion projects
themselves without the permission of the federal government.
The Finance Minister gave a detailed briefing to the
meeting on the economic performance and said that GDP growth rate may
touch 5.6 percent as against 5.3 percent as per earlier estimates for
the current fiscal year, because of robust growth in various sector
during the first 8 months (July-Feb). He claimed that due to the prudent
economic policies of the present government, the per capita income will
cross $ 600 in 2004 from $ 532 in 2003 moving Pakistan from a low-income
country to medium income country.
The Finance Minister said that on the basis of the
available economic data, both for agriculture and industrial sectors, we
expect a GDP growth rate of 5.5-6 percent during the year. The original
GDP target for the year was 5.3 percent against 5.1 percent in 2002-03.
Shaukat said the industrial sector has shown a record growth of 14.7
percent during first half of the current fiscal year.
According to the official data, the large-scale
manufacturing (LSM), representing 93 manor industries with 75 percent
weightage in industrial sector, registered a growth rate of 14.7 percent
during July-December period, including food, beverages and tobacco 17.5
percent; textile and apparel 4.5 percent; leather products 53.5 percent,
paper and paper board 9.2 percent; chemical, rubber and plastic 12
percent; petroleum products 1.6 percent; tyres and tube 11.4 percent;
non-metallic mineral 16.2 percent; basic metal industries 18.6 percent;
metal products and machinery 37.5 percent and automobile 58.6 percent.
The industrial sector growth shows a board-based
recovery maintained the Minister. The LSM growth excluding sugar shows
14 percent increase, excluding textile 19.2 percent; excluding
automobile sector 12 percent, and excluding both auto and textile growth
comes to 15.5 percent, showing healthy recovery in all the major
industries. The Finance Minister said trends in the agricultural
economy, with 25 percent share in the GDP, are also encouraging. The
agriculture sector is expected to achieve its 4.3 percent growth target,
due to 29 percent higher water availability. He said the fertilizer
off-take has also increased by 15 percent during the year.
Detailing major indicators, he said the wheat crop
was sown on 8.2 million hectares, with a production estimate of 20
million tons. The cotton crop is expected to yield 10.3 million bales,
slightly below the target of 10.5 million bales due to pest attacks.
Sugar cane crop is estimated at 52.6 million tons, against the target of
48 million tons. As a result, the sugar production, having a major
weightage in the industrial basket, is expected to be 3.8-4 million
tons. The rice crop is estimated at 4.5 million tons, against the target
of 4.3 million tons. The non-crop agriculture sector has also been
showing good trends, despite the impact of the bird flu on the poultry,
The rate of inflation, measured by the Consumer Price
Index (CPI), is on the rising path for the last few months, registering
an increase of 3.49 percent during the first eight months of current
fiscal year. The whole Sale Price Index (WPI) registered an increase of
6.49 percent and Sensitive Price Indicator (SPI) by 5.1 percent. It is
largely believed that higher prices of the food products, and other
essential items, are fueling the rate of inflation during the last few
The Minister admitted there has been an upward trend
in the food inflation, which he said was due to shortage of supplies of
certain commodities, like wheat, meat etc. However, he maintained that
the government is closely monitoring the CPI trends in the economy. He
said the fiscal deficit and the monitory situation is under control, and
dismissed the changes of any major upsurge in the price indicators. The
fiscal deficit, during first half of the current fiscal year, has
remained at a record low level of 0.8 of GDP, or just Rs. 33.72 billion.
However, there has been an explosive growth in the private sector credit
off-take during the review period due to prevailing low interest rate
environment. The private sector credit off-take of Rs. 225.32 billion
(till February 21, 2004) shows increased economic activity in the
country. Overall monetary expansion during this period crossed the
yearly target to close at Rs.230.14 billion borrowing for the budgetary
support and net retirement of Rs. 29.5 billion by the Public Sector
Enterprises (PSEs), he added.
Shaukat Aziz hoped that GNP per capita will increase
to $600 during 2003-04, and in Purchasing Power Parity (PPP) terms about
$2000, against $492 in 2002-03. Per capita income is rising due to
higher level of net income from abroad, mainly the inflow of remittances
sent by overseas Pakistanis. Last year, Pakistan received record $4.24
billion remittances helping the per capita to increase from $419 to 492.
During first seven months of the current fiscal year, Pakistan received
$2.26 billion remittances. The government expects to comfortably achieve
$3.6 billion target for the year.
The foreign investment trends, however, have shown
poor performance so far. Net inflow of foreign private investment
totaled $301.6 million during July-January 2003-04, against $617.8
million during the corresponding period of the last fiscal year. The
Foreign Direct Investment (FDI) during this period indicated an inflow
of $339.5 million, compared with $596.4 million of the corresponding
period of 2002-03. Portfolio investment registered an outflow of $37.9
million in the review period, against an inflow of $21.4 million in the
comparable period of the last fiscal year. The minister, however, said
the Privatisation proceeds of Habib Bank Limited (HBL) would improve the
investment date in the coming months.
The trends in exports and imports have also show good
results so far. Exports from Pakistan registered 13.83 percent growth
during July-February period to a total of $7.9 billion, with a growth
rate of 17.2 percent, showing a trade gap of $1.2 billion. The import of
machinery and industrial raw materials has also maintained a decent
The collection of tax revenues by the Central Board
of Revenue (CBR) has shown 15.3 percent growth during July-February
period of the year to a total of Rs.313.2 billion, helped by rising
imports, which resulted in 40 percent growth in customs duty collection
and 14.3 percent in the sales tax revenues. The direct taxes also
maintained 10.8 percent growth rate.