ISLAMABAD, May 19: The National Economic Council (NEC) is likely to set the size of the next year's Public Sector Development Programme at Rs535 billion, about 25 per cent above the PSDP of the outgoing financial year.

Dawn has learnt that the NEC, the highest body on taking economic decision, will also review the PSDP 2006-07 and the Medium Term Development Framework (MTDF) 2005-10 when it meets here on May 31. It is also scheduled to monitor the ongoing development projects and approve the working draft of Vision-2030.

Prime Minister Shaukat Aziz will preside over the meeting to be also attended by the planning and finance ministers of all the four provinces, senior officials of the ministries of finance, commerce, industries and the Planning Commission.

The issue of under-utilisation of PSDP funds during the ongoing financial year is also expected to be taken up in the meeting.

"We are proposing about 25-30 per cent increase in the new PSDP and this is how the government plans to offer increased resources for development purposes in the budget for 2007-08", Deputy Chairman Planning Commission Dr Akram Sheikh told Dawn here on Saturday.

He said there will be around Rs95-100 billion additional funding to be provided and approved by the NEC in the new PSDP.

Dr Sheikh said the current PSDP included Rs270 billion share of the federal government, Rs115 billion share of the provinces and over Rs50 billion for the rehabilitation and reconstruction of October 8, 2005 earthquake, totalling Rs435 billion.

The growth momentum, he pointed out, needed to be maintained which required increased funding for new PSDP so as to make available adequate resources for education, health and vocational training.

According to an official summary to be presented in NEC and also obtained by this correspondent, rising inflation, poor exports, slow- down in imports and the widening current account deficit will be thoroughly discussed in the meeting.

The summary projects 7.5 - 8 per cent GDP growth for 2007-08 due to what it claimed strong pick up in domestic and foreign direct investment and strong performance of agriculture, manufacturing and service sector.

"The prospects for sustained high economic growth in 2007-08 would remain excellent," it added.

It further said that GDP growth for 2005-06, provisionally assessed at 6.6 per cent, is likely to go up to about 7 per cent in the revised estimates.

"Strict vigilance needs to be kept on money expansion to contain inflation to the annual target," the summary warned adding that the major taxes collected by CBR showed a comfortable position on government revenues and on the basis it is expected that the full year revenue target would be achieved.

The trade gap though has been widened to higher level but foreign inflows also recorded equally similar growth to bridge the gap.

"The only disturbing aspect of the current year's performance is export growth, which needs to be closely analysed for redressal of its problem, as this is important driving force of the country's economy, having impact on the overall economic performance," the summary added. In this regard, it said that Pakistan's first export plan to increase exports to 15 per cent of GDP from current level of 12-13 per cent by 2013 has been conceived proposing ways and means to accelerate the pace of exports growth.

The summary also conceded that slowdown has been witnessed in import growth, especially those related to production and export process, which are textile machinery and iron and steel.

"Current account deficit is likely to surpass the Annual Plan target of $6.3 billion, as it has already amounted to $4.4 billion during July-December 2006".

GDP growth for the year 2006-07 is estimated to be 7 per cent on the basis of preliminary assessment of agriculture growth and large scale manufacturing (LSM). Taking into account the growth objectives, containing inflation and likely behaviour in the external sector, the Credit Plan for the 2006-07 envisaged 13.46 per cent increase in money supply.

This was based on GDP growth target of 7 per cent and inflation rate target of 6.5 per cent. Net domestic assets were estimated to grow by Rs450.1 billion or 13.2 per cent. Credit Plan target for the private sector was set at Rs390 billion. "The net foreign assets of the banking sector system were envisaged to exert an expansionary effect to the tune of Rs9.8 billion."

The government borrowing for budgetary support at Rs59.4 billion has been 49.5 per cent of the credit plan target. Demand for the private sector credit amounted to Rs227.4 billion as against Rs283.4 billion during the corresponding period of last year. Expansion in credit to private sector is 58.3 per cent of the annual target.

The net assets of the banking system witnessed an expansion to the tune of Rs14 billion as against the contraction of Rs89 billion during the corresponding period last year.

The balance of payment projections for MTDF have been made keeping in view the long-term objectives of reducing the external dependency by increasing those sources of external financing that are stable, sustainable and have positive effects on growth.

The main element of strategy is diversification of exports, stable exchange rate, export competitiveness and trade liberalisation.