ISLAMABAD: Today (Monday) is the first meeting of the recently formed National Economic Council (NEC), which will examine current and upcoming investments and establish goals for the upcoming fiscal year.
In the midst of the planning division’s campaign to raise the federal Public Sector Development Program for the upcoming year to Rs1.5 trillion, as opposed to the Rs1.22tr approved by the Annual Plan Coordination Committee (APCC) last week, the council is aiming to achieve a 3.6% growth rate.
The highest constitutional body on economic policymaking, headed by Prime Minister Shehbaz Sharif, would consider a six-point agenda. Four provincial chief ministers, four federal ministers (for foreign affairs, defense, finance, and planning), and four provincial cabinet members from the corresponding provinces round out the 13-member group.
The meeting would approve the economic aims and targets for the following year (2024–25) and examine the results of the macroeconomic framework for 2023–24. The 13th five-year plan (2024–2029) is anticipated to be reviewed and approved for execution. A review of the public investment program’s execution status for the current year and approval of the investment plan for the upcoming fiscal year, which calls for about Rs4 trillion in development spending by the federal government and the provinces, are also scheduled for the meeting.
The APCC approved annual development plans (ADPs) of Rs700 billion for Punjab, Rs763 billion for Sindh, and Rs627 billion for Khyber Pakhtunkhwa, as well as a national investment plan worth roughly Rs2.869 trillion, including Rs1.22 trillion for PSDP. Considering its low resources and heavy reliance on federal transfers, Balochistan’s ADP would also be finalized during the NEC meeting.
According to reports, Punjab has solidified a significantly higher ADP than first suggested, which may coincide with the federal PSDP. The electricity industry would also demonstrate how they would use their own consumer-generated resources, approved by the Nepra, to allocate Rs185 billion towards development initiatives. As a result, it is anticipated that the entire national development plan will exceed Rs4 trillion in the upcoming fiscal year.
Encourage increased PSDP
The Central Development Working Party (CDWP) and the Executive Committee of the National Economic Council (Ecnec) are expected to submit performance reports to the NEC for the previous fiscal year. These reports should include the decisions made by the two forums and how they were carried out. A report on the operations of the state-owned companies will also be taken into consideration.
According to sources, the Planning Commission’s deputy chairman, Jehanzeb Khan, leads the APCC, which authorized a Rs1.221tr PSDP for 2024–25. However, the Ministry of Planning is still pressing for a Rs1.5tr PSDP.
The APCC had omitted certain important areas, according to the sources, and the prime minister and the minister of planning would probably give in to some further demands from the coalition partners.
A senior government official stated, “There’s nothing wrong with aiming for higher PSDP investment, though its implementation would depend on the actual resource availability during the course of the fiscal year.”
Growth Objectives
It has been suggested that the growth target for the upcoming year be 3.6 percent, with growth in the agriculture sector contributing 2 percent, the manufacturing sector 4.4 percent, and the services sector 4.1 percent. The Planning Commission stated that the growth prospects are contingent upon several factors, including “political stability, exchange rate stability on the back of improvement in external account and external inflows, macroeconomic stabilization under IMF’s program and expected fall in global oil and commodity prices.”
The 2 percent growth forecast for the agriculture sector represents a significant reduction. A severe dry spell and lower than usual rainfall are projected to provide inadequate water availability, especially for kharif crops, and to cause a contraction of 4.5 percent in the output of vital crops. It is anticipated that the livestock and other agriculture subsectors will rise at 3.8 and 4.3 percent, respectively.
With a targeted rise of 4.4 percent, the industrial sector is predicted to rebound in 2023–2024 on the strength of projected 3.5 percent growth in large-scale manufacturing (LSM).
Improved input and energy supplies as a result of the predicted drop in global oil and commodity prices, additional relaxation of import restrictions, increased public sector spending, exchange rate stability, and a drop in interest rates are all projected to support this. These factors are predicted to result in lower pricing for building materials, which will help the construction sector meet its growth objective of 5.5 percent in 2024–2025.
A 4.1 percent growth in the services sector is also anticipated. The intended development in the services sector will be complemented by the anticipated 3.1 percent growth in the sectors that produce commodities. A stronger expansion in the wholesale and retail trade, transportation, storage, and communications, among other areas, will be strongly correlated with an increase in economic activity in the industry, particularly in the manufacturing sector.
It is anticipated that the overall investment-to-GDP ratio will rise from 13.1 percent in 2023–2024 to 14.2 percent in 2024–2025 as a result of anticipated economic growth, a stronger business climate, and political stability.
Nominal fixed investment is predicted to expand by 27.6 percent, while GDP share of fixed investment is predicted to rise from 11.4 percent in 2023–2024 to 12.5 percent in 2024–2025. The goal for national savings is 13.3% of GDP in 2024–2025 as opposed to 13% this year.
The government anticipates that fiscal consolidation efforts, which emphasize raising tax income and reducing non-development spending, such as subsidies, will result in a reduction of the fiscal deficit. The goals of inflationary expectations and growth resurgence will be reflected in monetary policy. The average domestic inflation rate is predicted to drop to 12% in 2019 due to a decline in worldwide inflation.
