On Wednesday, the Federal Cabinet approved Budget Strategy paper (BSP) for the fiscal next fiscal year, with a target to spend approximately PKR 1.497 trillion on development. As per the BSP, the federal government eyes reducing fiscal deficit to 4% of GDP, increase GDP by 6.5%, and limit inflation to 6%. The Finance Minister of Pakistan, Mr. Ishaa Dar, stated that the GDP growth will miss this year’s target of 5.5% and may only reach 5% during FY16. He attributed that shortcoming to a severe setback to the cotton crop this season. However, he said that additions in gas and power sector, heavy investments by China under China-Pak Economic Corridor (CPEC), and improved security conditions should still see economic growth by at least 6.5% by the end of next year.
Mr. Dar assured the federal cabinet that Pakistan will achieve 7% growth by 2018 by increasing fixed investment-to-GDP rate to 19.5% over the next fiscal year and later to 21.1% in 2017-2018. Currently, this rate lies at 16%. According to BSP estimates, inflation is projected to touch 6% during this fiscal year however, it will remain flat over the next two fiscal year. Dar promised the cabinet to deliver on the fiscal deficit limit of 4.3% of GDP during FY16 and scale it down to 4% next year. He assured further reduction to 3.5% in FY18. Speaking about the unemployment rate, Dar said that the current unemployment rate of 5.3% would be reduced to 4.8% in 2016-2017 and to 4.5% the following year.
Speaking on development, which was appropriated PKR 1.315 trillion in the current year, Dar said that in the next fiscal year, the value will be beefed up by at least 14% to PKR 1.497 trillion. Public Sector Development Program (PSDP) would see a budget increase of 14% from PKR 700 billion to PKR 800 billion next year. The annual development plans of the four provinces will also receive budget increase at 16% from PKR 600 billion to PKR 696 billion.
Public sector investment on both federal and provincial levels would see an expenditure of PKR 210 billion on energy, PKR 470 billion on infrastructure, and the social sector would consume approximately PKR 545 billion (primarily funded by the provinces). BSP further promised a total investment of $3 billion in gas projects (significantly higher than that of current year ~$880 million). Power projects around the country are expected to attract $10.5 billion compared to a current value of $7.3 billion. Moreover, transport and infrastructure projects are expected to consume $4.3 billion in investments compared to $2 billion this year. As such, the total investment in both the public and private sector for the next year is estimated at $17.8 billion compared to $10.4 billion in the current year – a whopping 71% increase.
The Prime Minister attended the cabinet meeting and expressed great satisfaction over development projects currently underway in Pakistan, and in the pipeline. He was pleased with the revenue collection and emphasized that the taxation system should be further improved. Mr. Sharif noted that the current trend of GDP growth would continue to decrease the unemployment rate within the country, and that PEC would create massive opportunities for the entire region.You can follow us on Facebook, Twitter, or Google+ for more updates. Otherwise fill in the subscription box above, or subscribe to our RSS Feed.