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Govt expects rise in exports, fall in imports during FY18

By Mehtab Haider
May 24, 2017

Annual Plan to be unveiled today

ISLAMABAD: Ministry of planning, development and reform will unveil the annual plan for the next fiscal year 2017/18 on Wednesday for the first time in the recent history, projecting current account deficit at 2.6 percent or $8.8 billion.

“The slashing down of projected current account deficit was based on an assumption of increasing exports by 6.5 percent and decreasing imports by nine percent over the next financial year,” sources confirmed to The News on Tuesday.

The current account deficit was projected at 2.7 percent for the outgoing fiscal year.

An official document showed that the economic growth prospects for 2017/18 are positive with strong performance of industrial sector, rebound in agriculture sector, pick-up in private sector credit along with improved security.

The improved performance of large scale manufacturing (LSM) is promising for the coming fiscal year. Private sector credit is gaining traction and expected to generate economic activity. Inflation, albeit slightly picking up, would remain subdued.

“However, high fiscal and current account deficits in 2017/18 may pose a challenge, if not properly leveraged for high growth,” according to the Annual Plan for 2017/18.

Growth for 2017/18 was targeted at six percent with major contribution from agriculture, industry and services sectors by 3.5 percent, 7.3 percent and 6.4 percent, respectively.

Growth targets are subject to risks such as extreme weather fluctuations, interruption in envisaged reforms and nonalignment of monetary and fiscal policies.

Inflation was forecast at six percent for FY18, giving a leeway for fiscal acumen, monetary adjustments and stable exchange rate.

Agriculture sector was targeted to grow 3.5 percent on the basis of expected contribution from important crops (two percent), other crops (3.2 percent) ginned (6.5 percent), livestock (3.8 percent), fishing (1.7 percent) and forestry (10 percent). Adequate production of cotton is expected during the next fiscal year, given better performance of cotton crops in 2016/17 and upward cotton price trend. The growth prospects for livestock, fishing and minor crops are bright. 

The industrial sector was expected to grow 7.3 percent during 2017/18 on the back of better energy supply and planned investment under the China-Pakistan Economic Corridor (CPEC). The mining and quarrying sector was projected to grow by 3.5 percent. 

The manufacturing sector was expected to grow 6.4 percent for 2017/18 with growth rate of LSM 6.3 percent, small and household manufacturing 8.2 percent, construction 12.1 percent and electricity, generation and gas distribution 12.5 percent. 

Several energy-related fast-track projects under CPEC were expected to be completed in the next fiscal year. LSM growth will also go up with the ongoing construction activities and infrastructure projects.

Service sector was targeted to grow 6.4 percent in 2017/18, supported by growth of 5.1 percent in transportation, communication and storage, 7.2 percent in wholesale and retail trade, 9.5 percent in finance & insurance, four percent in housing, seven percent in general government service and 6.7 percent in other private services sector. 

The expected higher growth in commodity producing sector (based on availability of affordable energy source and finances) will support the targeted growth in services sector, according to the annual plan FY18.  Investment was targeted at 17.2 percent in order to realise sustained and investment growth. National savings, as percentage of GDP, were targeted at 14.1 percent in the annual plan. 

The investment under CPEC is expected to support the overall investment climate. Fixed investment was expected to grow to 15.6 percent for 2017/18.

The annual plan said fiscal policy will focus on spurring growth through mobilising revenues, increasing public expenditures efficiency and switching to targeted subsidies, while prioritising development spending.