ISLAMABAD: Pakistan’s economy is likely to grow by 3.3 per cent in the year to June 30 and strong manufacturing and steady farm growth have raised hopes of 4 per cent growth next year, government officials said on Tuesday.
Nuclear-armed Pakistan, an important US ally which is fighting to quell growing Islamist militancy, has struggled to keep its economy afloat with the help of a $11.3-billion loan from the International Monetary Fund.
Gross domestic product (GDP) growth in the 2008/09 fiscal year (July-June) slipped to 2 per cent, tantamount to recession in a country with annual population growth of more than 2 per cent. But a rejuvenated manufacturing sector and prospects of stability in the farm sector have raised hopes for up to 4 per cent growth in 2010/11, said officials at the Planning Commission, which has a main role in drawing up the budget.
“With the economy showing signs of stability, there is no reason why we can’t achieve up to 4 per cent growth next year,” said one of the officials, who declined to be identified.
Another commission official said that for this year, it would be realistic to assume about 3.3 per cent GDP growth. The central bank last week kept its economic growth projection for this year at 2.5-3.5 per cent.
“The manufacturing sector has shown strong signs of revival and we are also seeing stability in agriculture growth,” said the second official. Large-scale manufacturing grew by 2.3 per cent between January and July this year, after a 5.4 decline in the whole of the 2008/09 fiscal year.
“Growth in the agriculture sector is likely to be about 3 per cent, which is lower than the 4.7 per cent last year, but still it has a stable outlook,” said the first official.
The budget for the 2010/11 fiscal year is expected to be announced in the last week of May. The 2009/10 fiscal deficit, originally targeted at 4.9 per cent of GDP, was expected to be 5.2 per cent this year, the officials said, attributing the wider deficit to the slow arrival of funds promised by allies.
“The aid that was promised did not materialise and that certainly created a squeeze on the fiscal side,” said the second official. The central bank last week raised its fiscal deficit forecast to between 5.0 and 5.5 per cent from a previous forecast of 4.7-5.2 per cent of GDP for this fiscal year.
Last year, Rs178 billion ($2.11 billion) of aid from the “Friends of Pakistan” group of allies, who pledged $5.7 billion in April 2009, was factored in to the budget. But only a fraction of that has arrived, forcing the federal government to cut development spending by 25 per cent to Rs300 billion for the 2009/10 year and holding back growth, the officials said.
“For next year, development spending by the federal government is again being targeted at Rs300 billion,” said one of the officials.
The overall development budget, known as the Pubic Sector Development Programme, which includes projects funded by provincial governments, was Rs646 billion in 2009/10.
Pakistan says the US-led campaign against militancy and the violence it has provoked in Pakistan have almost crippled its economy, and cost Pakistan $35 billion since 2001.
Source: http://www.thenews.com.pk/daily_detail.asp?id=232909
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