POLICY
 
 
GOVT TO SPEND RS2000 BILLION ON PSDP IN NEXT 5 YEARS
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Focus on water, energy, security, infrastructure and human resource development

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From SHAMIM A. RIZVI,
Islamabad

Mar 14 - 20, 2005
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The National Economic Council (NEC) chalked out a medium-term framework for Public Sector Development Programme (2005-10). It commonly known as five-year plan with an impressive allocation worth over Rs2000 billion.

Of the total development fund, 54 percent will go to the infrastructure sector followed by social sector with an allocation of Rs655 billion or 231 percent.

The most impressive development plan ever targeted provides Rs293 billion for water sector to enhance water availability to 150-35 million acre feet from existing 135 HAF, while an amount of Rs240 billion has been provided for regional development and Rs66 billion for production support.

The NEC meeting was presided over by Prime Minister Shaukat Aziz and was attended among others by the Chief Ministers of Sindh, NWFP and Balochistan, Governor NWFP, the AJK prime minister, provincial finance and planning ministers and federal ministers.

The NEC also authorized the Planning Commission to circulate the plan among the federal ministries and provincial governments and other stakeholders for their comments before formal approval in its pre-budget meeting to be held in May.

The plan envisages an increase in the gross domestic product growth rate from the current year's seven percent to eight percent in 2010 and maintaining it afterwards and increase in investment from 19.7 percent of the GDP to 25.6 percent in 2009-10, national savings from 18.6 percent to 23.6 percent (Rs1.1 trillion to Rs1.8 trillion) and containing inflation below six percent.

The agriculture sector is expected to grow at the rate of 4.5 percent in 2010 and attain an average of 4.3 percent, manufacturing to grow at 11.5 percent, large scale manufacturing at 13 percent and services sector at 7.4 percent.

Wheat production is expected to increase from 20.2 million tonnes to 24.9 million tonnes in 2010, exports and imports are projected to increase from previous $13.7 billion and $16.4 billion to $22.47 billion and $26.26 billion, respectively.

The projects will increase Public Sector Development Plan allocations from Rs202 billion (3.3 percent of the GDP) to Rs604 billion (7.7 percent) in 2009-10 and bring down fiscal deficit from 3.7 percent to 3.2 percent. The total public debts as percentage of the GDP would come down to 100 percent from the current 103 percent.

The plan envisages an increase in total revenue from the current 13.3 percent of the GDP to 14.9 percent and tax revenue from 10.7 percent to 11.8 percent. The poverty rate has been projected to decrease to 20 percent in 2010 and 13 percent in 2015 from the current 32.1 percent. The unemployment rate has been projected to come down from the current seven percent to four percent in 2010 as 5.48 million people would get jobs while the population is expected to go up to 165.5 million in 2010 from 151.5 million.

 

 

The government has decided, under the plan, to develop seven major infrastructure projects through public private partnership financing the Karachi Mass Transit, all future motorways and freeways, the Rawalpindi Bypass, the Lakhpass Tunnel, the Karachi Hyderabad Superhighway, the Lodhroan-Khanewal National Highway and the Tarnol Interchange.

In the projects, oil demand will increase from 16.8 million tonnes to 20.7 million tonnes, gas from 3.173 MMCFD to 4.565 MMCFD and coal demand from 7.4 million tonnes to 16 million tonnes. The energy plans envisages an allocation of Rs70 billion for the Pakistan Atomic Energy Commission, Rs20 billion for alternate energy sources and an amount of Rs242 billion allocated for hydroelectric development projects in WAPDA.

Value addition in the manufacturing sector has been projected to increase from $17 billion in 2005 to $28.6 billion by 2010 and $188 billion by 2030 and its share in the GDP rising from 17.5 percent in 2005 to 21.3 percent in 2010 and 30 percent by 2030. The share of minerals has been projected to increase from 1.5 percent to three percent of the GDP by 2010. The construction of new housing units has been projected from 300,000 to 800,000. The plan allocates Rs360 billion, including a Rs144 billion foreign exchange component for development of water resources including Bhasha dam and any other project to be taken in hand during the period.

The government also plans to start work on the Rs84 billion Neelum-Jhelum Hydropower project in Azad Kashmir with an initial allocation of Rs4 billion in 2005-06. The water sector allocations will be increased by more than 100 percent to Rs59 billion from the current year's Rs24.8 billion, which will enhance the water availability to 138.58 MAF in 2005-06. The allocations in 2006-07 and 2007-08 would be increased to Rs 69 billion to raise water availability to 147.65 MAF. The allocations would come down to Rs24 billion and Rs21 billion in 2008-09 and 2009-10 and an availability of 150.35 MAF would be achieved.

The plan says that Pakistan currently suffers an annual loss of about Rs650 billion due to wastage in different sectors including the post harvest losses amounting to Rs100 billion. The plan emphasized to make good of these losses by initiating a number of measures, including skill development.

Power production has been projected to increase to 27,389MW in 2010 from 2,289MW. Growth of power demand has been projected at 7.9 percent.

The government seems to have decided at last to use the massive fiscal space that has emerged as a result of the extra generous debt rescheduling and equally generous bilateral and multilateral aid flows over the last five years for the socioeconomic uplift of the masses. Understandably, with the IMF out of the way, the government seems under no compulsion to continue with its tight fisted policies, which, while yielding macroeconomic stability, has only deepened economic stagnation.

Public sector development outlay, estimated at about Rs2 trillion over the next five-year period, is a huge increase that should play a decisive role in meeting people's much neglected social needs, especially the needs of the underprivileged. It is, therefore, of crucial importance that the goals set out are achieved, and their results trickle down to the grassroots level. While the medium-term development framework is obviously loaded with indicative target figures, certain facts deserve special mention. For instance, the plan envisages reduction in the poverty level to 20 percent by 2010 and 13 percent by 2015. It also emphasizes on reducing the unemployment rate. Its emphasis on maintaining the budget deficit at around three percent indicates that special attention will be given to continue maintaining fiscal discipline. Encouragingly, greater efforts have been promised in enhancing regional development; this must be continued deter mindedly. The commitment to further reduce the country's debt burden is also there. The proposed development framework should be widely debated to ensure greater participation by various sections of society.

Over the last two years, the manufacturing sector has come out with an impressive performance, however wheat and sugar output lagging behind the target leaving a shortfall in imports. The shortfall in agriculture production mainly on account of water shortage calls for dams and water reservoirs. However, consensus driven policy initiatives are essentially required to ensure that the country remains self-sufficient in food.