ISLAMABAD: Pakistan's National Economic Council (NEC) has set next year’s economic growth rate target at five percent with Rs2.184 trillion worth of consolidated public sector investment, almost unchanged from a Rs2.135 trillion development allocation in the current year, local media reported on Thursday.
Pakistan will present its budget tomorrow, Friday, as it tackles a stuttering economy with huge deficits, dwindling foreign reserves, a widening current account deficit and inflation in the double digits.
The meeting of the NEC, the country’s highest economic decision-making body, was chaired by Prime Minister Shehbaz Sharif on Wednesday.
“The NEC also approved the Macroeconomic Framework for Annual Plan 2022-23, which envisaged 5 percent growth rate on the back of agriculture (3.9 percent), manufacturing (7.1 percent) and services (5.1 percent) sectors,” Dawn reported.
Officials said the consolidated size of the national development budget was set at Rs2.184 trillion, which included a federal allocation of Rs800 billion against the current year’s allocation of Rs900 billion, while the total federal expenditure would be restricted at Rs550 billion. The provinces would separately formulate their annual development plans worth Rs1.384 trillion in aggregate against Rs1.235 trillion for the current year, showing an increase of over 12 percent.
The council also unanimously decided that 60 percent of the federal public sector development programme (PSDP) would be spent on ongoing development projects and the remaining 40 percent on new projects to “help accommodate maximum projects of the coalition partners ahead of general elections next year,” Dawn said.
Meanwhile, the World Bank has said in its latest economic prospects report that growth in Pakistan would slow to four percent in 2022-23 from 5.7 percent in fiscal year 2020-21.
Pakistan is facing a balance of payment crisis with forex reserves falling below $10 billion, enough for around 45 days of imports. It double digit inflation and a widening current account deficit have put it in a tight spot.
Moody's has changed Pakistan's outlook to negative from stable.
Pakistan has also been waiting for the IMF board to clear a seventh review to resume a $6 billion rescue package signed in 2019 after both sides concluded talks in Doha last month without a breakthrough.
“In Pakistan, growth is expected to slow from 5.7 percent in FY2020/21 to 4.0 percent in 2022/23 as foreign demand slows significantly and policy support is withdrawn to contain external and fiscal imbalances,” the World Bank said in its Global Economic Prospects report for June 2022.
Last week the government said Pakistan GDP growth would slow to 5% for the upcoming fiscal year beginning on July 1, from 5.9% in the outgoing year, following budgetary tightening aimed at winning International Monetary Fund (IMF) support.
The planning ministry made the estimates ahead of the annual budget to be presented on June 10.
"Keeping in view external and local uncertain economic environment, GDP growth will slightly taper off and is envisaged at 5 percent for 2022-23 on the back of agriculture (3.9%), manufacturing (7.1%) and services sector (5.1%)," the ministry said in a working paper, which added that fiscal consolidation would be pursued to bring down the deficit through a combination of expenditure management and revenue enhancement.
The paper said the fiscal deficit for the July-March portion of the outgoing fiscal year had widened to 4% of GDP, compared to 3% of GDP for the corresponding period last fiscal year.
The current account posted a deficit of $13.8 billion (3.5 % of GDP) in July-April of the outgoing financial year, it said.
Average inflation was recorded at 11.3% during July-May of the current fiscal year, as compared to 8.8% in the comparable period of the previous year.
