ISLAMABAD: The federal cabinet on Wednesday approved Budget Strategy Paper (BSP) for the next fiscal year with a target to spend Rs1.497 trillion on development, reduce fiscal deficit to four per cent of gross domestic product (GDP), increase economic growth rate to 6.5pc and limit inflation to 6pc.

Finance Minister Ishaq Dar conceded before the cabinet meeting, presided over by Prime Minister Nawaz Sharif, that GDP growth rate was set to miss this year’s target of 5.5pc “mainly due to severe setback to the cotton crop”. He projected the rate to reach 5pc during FY16.

However, capacity additions in gas and power sector, additional investments under the China-Pakistan Economic Corridor (CPEC) and improved security environment would help the country achieve 6.5pc economic growth by the end of next year.

A federal minister told Dawn Mr Dar also assured the cabinet that Pakistan was expected to achieve 7pc growth by 2018. This would be attained by increasing fixed investment-to-GDP rate to 19.5pc over next fiscal year and then to 21.1pc in 2017-18 from the current rate of 16pc.

The BSP estimates inflation to touch 6pc during this fiscal year and remain flat at that rate over the next two fiscal years. The finance minister promised the cabinet to deliver on the fiscal deficit limit of 4.3pc of GDP during FY16 and scale it down to 4pc next year and 3.5pc in FY18.

Mr Dar said the unemployment rate of 5.3pc during the current fiscal year would be reduced to 4.8pc in 2016-17 and then to 4.5pc the year after. The country’s current account deficit, estimated at 1pc of GDP this year, would go up to 1.1pc next year and 1.2pc in 2017-18.

Budget Strategy Paper projects inflation to remain stagnant over the next two years

The cabinet was told that the total development outlay for the next fiscal year would be jacked up by 14pc to Rs1.497 from current year’s size of Rs1.315tr. Of this, the Public Sector Development Programme (PSDP) of the federal government would be increased by 14pc to Rs800bn next year from this year’s allocation of Rs700bn.

Likewise, the cumulative annual development plans of the four provinces would also go up to Rs696bn next year from current year’s revised estimates of Rs600bn, a rise of 16pc.

The total public sector investment (both federal and provincial) would involve an expenditure of Rs210bn on energy and Rs470bn on infrastructure (both federal expenditures and signature projects of the PML-N), while the social sector would consume about Rs545bn which would mostly be funded by the provinces. All other sectors would attract investments of about Rs280bn, both from federal and provincial kitties.

Going into details of both public and private sector investments, the BSP promised a total of $3bn investment in gas projects (natural gas supplies and import of gas and liquefied natural gas), significantly higher than $880 million this year. Likewise, power projects are targeted to attract $10.5bn investment during the next year compared to $7.3bn investment jointly made so far by the private and public sectors during this year, Mr Dar said.

On top of that, transport and infrastructure projects are projected to consume $4.3bn investment against $2bn this year. As such, total public and private sector investment for the next year was estimated at $17.8bn, 71pc higher compared to $10.4bn in the current year.

The BSP projected the power generation from gas to add 5,000 megawatts in the next two years by increasing gas supplies from current year’s 250 mmcfd (million cubic feet per day) to 1.120bn cubic feet per day, an increase of 350pc.

An official statement quoted the prime minister as directing his economic team that economic policies should be welfare oriented, ensuring the benefits of economic progress reach the common people.

He appreciated the fact that the overall economic progress achieved during the last three years of the government had set the stage for further progress and development of the country. He noted that the key economic indicators, which were at rock bottom three years ago, have improved remarkably and would lead to allocating more resources for the welfare of the poor and promoting the development agenda of the government.

The premier expressed satisfaction over the strategy for increasing revenue collection and emphasised the taxation system should be further strengthened by widening the tax net. He said more steps should be taken to facilitate overseas Pakistanis to send remittances through banking channels because they had a remarkable contribution to economic stabilisation and also to increase exports.

The Wednesday’s cabinet meeting noted that while benefits of mega-projects in the pipeline would start unfolding from the next year, immediate measures are needed to encourage investment by the private sector. Mr Sharif said that the current trend of GDP growth would continue to create jobs for the youth and CPEC projects would create huge opportunities for the whole region.

He said the government would overcome the gas shortage within this tenure, and directed the economic team to address the issues of agriculture and manufacturing sectors to boost growth and strengthen the economy.

Published in Dawn, April 28th, 2016