In a significant move, the National Economic Council (NEC), led by Prime Minister Shehbaz Sharif, has sanctioned an ambitious national development plan worth Rs3.792 trillion for the upcoming fiscal year. The plan aims to boost Pakistan’s GDP growth rate to 3.6% from the current 2.4%, despite expected scrutiny from the International Monetary Fund (IMF) as Pakistan continues negotiations for a $6-8 billion bailout over three years.
During the four-hour-long NEC meeting, a 47% increase in the federal Public Sector Development Programme (PSDP) was approved, raising it to Rs1.4 trillion compared to the current year’s Rs950 billion. Including Rs100 billion allocated for public-private partnership (PPP) projects and Rs197 billion from state-owned entities, the total federal development programme reaches Rs1.696 trillion. This is a notable increase from the Rs1.221 trillion previously approved by the Annual Plan Coordination Committee (APCC).
In a notable shift, Rs75 billion has been allocated for parliamentarians’ schemes under the Sustainable Development Goals Achievement Programme, up 23% from the current year. Provincial demands were also addressed, resulting in a higher PSDP allocation.
Provinces’ annual development plans, totaling Rs2.095 trillion, received approval with an agreement to continue funding high-priority provincial projects that are over 80% complete. Sindh Chief Minister highlighted the province’s previous neglect and secured compensation for the ‘missed years’ under the PTI-led government. Balochistan and Khyber Pakhtunkhwa also voiced concerns about insufficient federal funding for ongoing projects, leading to adjusted allocations in the federal PSDP.
The meeting underscored the deteriorating fiscal position of the Centre post-7th National Finance Commission Award, with increased interest payments and a significant rise in the share of provincial projects in the PSDP. This scenario has adversely affected federal projects of strategic and national importance.
The NEC’s decisions led to adjustments in federal programme allocations. The transport and communications sector saw an increase to Rs279 billion, while the energy sector’s allocation was restricted to Rs253 billion, and the water sector to Rs206 billion. Conversely, social sector funding increased significantly to Rs280 billion, with higher education benefiting the most with an allocation of Rs93 billion.
Special areas like Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (GB), and merged tribal districts also saw increased allocations post-APCC interactions. The federal PSDP includes Rs316 billion in foreign financing, with significant allocations for federal ministries and corporations like NHA, Wapda, and power companies.
The growth target for the next fiscal year is set at 3.6%, driven by expected growth in agriculture (2%), the industrial sector (4.4%), and services (4.1%). The Planning Commission emphasized that these growth prospects hinge on political stability, exchange rate stability, macroeconomic stabilization under the IMF’s program, and anticipated reductions in global oil and commodity prices.
The investment-to-GDP ratio is expected to rise from 13.1% in 2023-24 to 14.2% in 2024-25, with fixed investment growing by 27.6% on a nominal basis. National savings are targeted to increase to 13.3% of GDP.
The commission acknowledged the pressures on forex reserves and exchange rate due to scheduled external debt repayments but projected a positive outlook for remittances, exports, and external inflows to mitigate these pressures.
The NEC’s expansive public investment plan reflects a strategic effort to stimulate economic growth and address longstanding provincial disparities, even as the country navigates complex negotiations with the IMF.