Govt proposes allocation of Rs163.554 bn for hydropower projects

Dar terms 5.7% GDP growth target more realistic; APCC all set to okay Rs1,675 bn for PSDP, provincial uplift outlays for budget today; nominal GDP is targeted to grow by
Rs33,063 bn and GNP per capita is projected at Rs179,900 bn; CPEC expected to improve overall investment climate

ISLAMABAD: With envisaging macroeconomic targets including GDP growth at 5.7 percent, inflation below 6 percent, exports $24.7 billion, imports $45.2 billion and current account deficit hiking to $4.8 billion in upcoming budget 2016-17, the government proposed allocation of Rs163.554 billion for hydropower projects including Rs32 billion for Diamer-Basha Dam for land acquisition as well as for its construction of five lots.

The government also envisages allocation of Rs27.560 billion for Pakistan Atomic Energy Commission (PAEC) including allocation of Rs500 million for acquisition of land and development of basic facilities and detailed studies of nuclear power plant site at Sukkar.

The Annual Plan Coordination Committee (APCC), scheduled to meet today (Friday) is all set to approve Rs1,675 billion for both federal PSDP and provincial development outlays in the next budget as well as according approval to macroeconomic framework. However, the Planning Commission envisages GDP growth target at 5.7 percent for upcoming financial year which is lower than the Cabinet’s approved figure of 6.2 percent tabled by the Finance Ministry under Budget Strategy Paper (BSP) for 2016-17.

When contacted to Finance Minister Ishaq Dar for seeking his comments on Thursday night, he replied that after GDP loss of 0.5 percent due to cotton crop in outgoing financial year, the GDP growth target of 5.7 percent may be more realistic target and consequential changes in framework can be addressed.

For land acquisition of Basha Dam, the proposed allocation stands at Rs14 billion, construction of Basha Dam from lot 1 to 5 with estimated cost of Rs18.3 billion, Dasu Dam Rs42 billion, Neelum-Jhelum Hydropower project Rs61.4 billion, Tarbela Extension-IV Rs16.487 billion, 

According to macroeconomic framework going to be considered by APCC for approval and recommending to National Economic Council (NEC) which was scheduled to meet on May 30 under chairmanship of Prime Minister Nawaz Sharif, the Planning Commission projected GDP growth at 5.7 percent with contribution from agriculture 3.48 percent, industry 7.69 percent and services 5.73 percent in 2016-17.

Nominal GDP (market price) is targeted to grow by Rs33,063 billion and GNP per capita is projected at Rs179,900. The growth target, according to summary, is subject to risks such as extreme weather fluctuations, interruption in envisaged reforms and non-aligned monetary and fiscal policies. The inflation level is expected to remain below 6 percent providing leeway for fiscal acumen monetary adjustment and stable exchange rate.

Investment is targeted at 17.7 percent of GDP in order to realise the targets of sustained, indigenous and inclusive growth. National savings as percentage of GDP is targeted at 16 percent. The investment under CPEC is expected to improve the overall investment climate. Further, the improvement in investment friendly environment as a result of affordable energy, increased profitability, high capacity utilisation and reduced political and economic uncertainty will help attain investment target for 2016-17. Fixed investment is expected to grow at 16.1 percent of GDP by 2016-17.

Average inflation during 2016-17 is projected at 6 percent on the basis of anticipated low oil and commodity prices and stable exchange rate. Though oil prices have started inching up, the increase remains sluggish and the effect of imported inflation is expected to remain low (below 6 percent). 

Global outlook for commodities' prices remains cautionary for 16-17 with little expectation of quick resurgence. Given the declining trend in exports, concerted effort is required for its rebound. Hence, trade balance is projected to be in deficit by $20 billion in 2016-17. However, given the completion of CPEC projects and pickup for industrial sector, the exports and imports are expected to gain momentum. Exports projected to grow by 10.8 percent ($24.7 billion) while imports projected to increase by 14.8 percent ($45.2 billion). The current account is projected to be in deficit by $4.8 billion in 2016-17 (1.5 percent of GDP) as against a deficit of $1.7 billion (0.6 percent of GDP) estimated for 2015-16.