Tuesday December 06, 2022

NEC under PM okays Rs2,101 bn outlay: Rs900b for Centre, Rs1201b for provinces approved

June 08, 2021

ISLAMABAD: The National Economic Council (NEC) Monday approved the macroeconomic framework for Annual Plan 2021-22, also the GDP growth projections for the financial year 2021-22, whereas the proposed growth target of 4.8 percent was approved with sectoral growth targets of 3.5 percent for agriculture, 6.5 percent for industrial sector, and 4.7 percent for the services sector.

To this effect, a meeting of the NEC was held under the chairmanship of Prime Minister Imran Khan here. Chief ministers of all provinces and other members of the NEC participated in the meeting.

Ministry of Planning Development and Special Initiatives presented the Public Sector Development Programme (PSDP) for 2021-22. The NEC was informed that the revised estimate for the total development outlay of the ongoing year is Rs1,527 billion. As against this, the total development outlay for the next financial year would be over Rs2,100 billion, including PSDP of Rs900 billion. This includes Rs244 billion for transport & communications, Rs118 billion for energy, Rs91 billion for water resources, Rs113 billion for social sector, Rs100 billion for regional equalisation, Rs31 billion for science and technology and IT sector, Rs68 billion for SDGs and Rs17 billion for production sector.

The Council was told that the focus of PSDP would be on infrastructure improvement, water resources development, social sector improvement, regional equalisation, skill development, promotion of science and technology, and IT, as well as climate change mitigation measures.

The meeting was informed that the PSDP would cater to the government’s plans to increase focus on areas and regions lagging behind. For the purpose, sufficient allocations have been made for projects of south Balochistan, various districts of Sindh, as well as for Gilgit-Baltistan.

Allocations have also been made for infrastructure projects of south districts of Punjab. Similarly, an allocation of Rs54 billion has been made for the newly merged districts of KP. In the social sectors, Higher Education Commission has been allocated Rs42 billion.

The NEC was informed that with the operationalisation of the Public Private Partnership Authority, a number of PPP projects are also being expeditiously processed for implementation. These include Sukkur-Hyderabad Motorway and Sialkot-Kharian Motorway, which are at an advanced stage. While other major projects such as Karachi Circular Railway (KCR), KPT-PIPRI freight corridor, Kharian–Rawalpindi Motorway, Balkasar–Mianwali Road, Quetta–Karachi-Chaman Highway are also likely to be launched during the year.

The government has, for the first time ever, made an allocation of Rs61 billion in the PSDP for financing the viability gap of PPP projects, to make sure that PPP projects can be successfully implemented.

Addressing the meeting, the PM emphasised increasing the pace of implementation of development projects to ensure that the gains made through stabilisation of the economy could be translated into economic growth, resulting in the well-being of the people of Pakistan.

While registering aggressive protest over reduced share in federally funded development projects by Sindh Chief Minister Murad Ali Shah, the NEC approved national development outlay of Rs2,101 billion and envisaged GDP growth of 4.8% for the next budget.

Inflation was targeted at 8 percent for the next fiscal year against revised estimates of 9 percent for outgoing fiscal year. The government envisaged investment-to-GDP target at 16 percent and savings-to-GDP ratio of 15.3 percent in the next budget.

Out of national development outlay of Rs1,201 billion for the next budget, the NEC approved Rs900 billion for federal Public Sector Development Program (PSDP) and Rs1201 billon for provincial Annual Development Outlays (ADPs).

After attending the meeting, the Sindh CM told journalists at Sindh House Islamabad that he protested during the NEC meeting for discriminating against Sindh because the Centre was not providing funds as they were doling out to their favourites. He said the share of Sindh in development funds decreased and mentioned allocation in different ministries. He said that Sindh did not get its due share of water. He said that the NFC was not convened and decisions into CCI were taken with majority. The sources said that PM Imran Khan objected over CM Sindh concerns for reducing share of Sindh and argued that please mention overall reduction in your share instead of mentioning ministry wise.

Out of the total federal PSDP of Rs900 billion, the rupee component stands at Rs799 billion and foreign aid Rs101 billion. The provincial ADPs is comprised of Rs1201 billion out of which Rs1009 billion will be earmarked as rupee component and Rs192 billion as foreign aid.

The government allocated Rs526 billion into PSDP for ministries, Rs167 billion for corporations such as NHA-Wapda and Power, Rs45 billion for Special Areas in AJK and GB, Rs54 billion for merged districts of KP, SDGs and other initiatives Rs74 billion and Rs34 billion for packages. The government is considering to reduce allocation of SDGs from Rs74 to Rs46 billion as development schemes are executed through recommendation of parliamentarians.

The NEC approved policy for financing of provincial projects so it is recommended that PSDP funding should be restricted only for deprived areas, there should be equal provincial contribution, PSDP funding for capital investment only, provinces to fund land acquisition, resettlement, provincial taxes and cost of PMU, financing of any subsequent change in scope and cost would be responsibility of the province, provincial governments to take over projects on completion immediately and simultaneous development of command area in case of irrigation projects.

The NEC granted approval of Rs558.079 billion for infrastructure projects out of which Rs120.882 billion would be allocated for energy sector, Rs105.223 billion for water including Diamer Basha dam, Rs291.941 billion for Transport and Communication including Viability Gap Fund (VGF), and Rs40.033 billion for Physical Planning and Housing.

The government allocated Rs286.718 billion for Social and Regional Equalization Programme. For social sector, the government has allocated Rs186.718 billion out of which Rs31.412 billion allocated for health, Rs6.234 billion for education and training, Rs43.375 billion for higher education, Rs15.463 billion for environment, Rs5.236 billion for manpower and employment, Rs74 billion for SDGs, Rs5 billion for COVID-19 and Rs5.998 billion for other projects.

Macroeconomic Targets: The annual plan for 2021-22 envisaged macroeconomic stability in the wake of fiscal consolidation, external account and revival in agriculture and industrial growth.

The GDP growth for 2021-22 is targeted at 4.8 percent with major contributions from agriculture (3.5 percent), industry (6.5 percent) and services (4.7 percent).

Agriculture Sector: Agriculture sector is targeted to grow by 3.5 percent on the basis of expected contributions of important crops (2.2 percent), other crops (3.2 percent), cotton ginned (10 percent), livestock (3.7 percent), fisheries (5 percent) and forestry (5 percent).

The agriculture growth is mainly contingent upon revival of cotton on account of better certified seed and pesticides availability. Moreover, consistent availability of water, certified seeds, fertilizers, pesticides and agriculture credit facilities will help to achieve the targeted growth.

Industrial Sector: The country’s industrial sector is targeted to spearhead the growth momentum by growing at 6.5 percent during 2021-22. Manufacturing sector is targeted to grow by 6.2 percent based upon LSM growth of 6 percent, and small scale & household manufacturing at trended growth. Moreover, construction and electricity generation & gas distribution are 9 targeted to grow by 8.3 percent and 10.7 percent, respectively.

Mining and Quarrying sector is projected to grow by 4.1 percent. Industry is expected to pick up pace in 2021-22 with the implementation of envisaged export promotion and industrial development measures. Recent new entrants in automobile sector will add to competition in the sector.

Prime Minister’s special package for construction sector is expected to play a significant role in accelerating growth in construction and allied industries. As a result of combined Federal PSDP, Provincial ADPs, Naya Pakistan Housing Initiative, FBR’s Construction Amnesty Scheme, and NPH and the mandatory 5 percent bank portfolio for mortgage finance, amounting to more than Rs2 trillion, the construction sector is expected to be a major growth anchor in the Industrial sector. In addition, Energy demand is expected to increase by 6 percent which will feed into Electricity Generation & Gas Distribution sub-sector growth. 33. Services Sector is targeted to grow by 4.7 percent in 2021-22 which is still lower than its five-year pre-COVID annual average growth of 5.3 percent.

This growth is supported by 4.6 percent growth in wholesale & retail trade, 4.7 percent in transport, storage & communication, 5.2 percent in finance & insurance, 4.0 percent in housing, 4.5 percent in general government services and 5 percent in other private services. The expected revival in commodity producing sectors will complement the targeted growth in services sector.

Fiscal Policy: Fiscal policy during 2021-22 envisages containing fiscal deficit, additional resource mobilization, controlling current spending and switching to targeted subsidies while prioritizing development spending. But more importantly it will be supporting economic growth.

Monetary Policy: The balanced monetary policy is aimed at supporting economic growth while remaining vigilant about macroeconomic stability and aggregate demand. The challenge would be to strike a balance between growth and stability in such a way that monetary policy tools provide much needed support to economic growth while containing inflationary pressure.