The National Economic Council (NEC) is all set to approve 12th Five-Year Plan (2018-23) Wednesday (May 29). The 12th Five-Year Plan is presented in the backdrop of serious macroeconomic imbalances and a huge structural deficit. A 39-month IMF adjustment program will be implemented during the plan period.
The major thrust of the fiscal policy would be on domestic resource mobilization. Wide-ranging reforms will be initiated to increase tax-to-GDP ratio and rationalize expenditure with the objective of containing fiscal deficit within manageable limits. Fiscal policy involves intensive PSEs reforms, public financial management reforms and debt management reforms besides tax policy reforms. The monetary policy stance adopted during the plan period will not only be consistent with the growth and investment objectives but also target inflation to contain it to a single digit.
Fundamental reforms to minimize government borrowing for budgetary support and addressing the financial losses of PSEs will be initiated to ensure sufficient availability of funds for the private sector expansion. Financial regulators will work to ensure international best practices. The objectives under the capital market development plan include strengthening the linkages between capital market and real sectors, diversification of investment alternatives, increasing participation of non-banking financial sector by extending outreach of capital market, facilitating ease of doing business, removal of inequality in taxation and strengthening the KYC/CDD framework for integration of the AML/CFT regime in overall capital market framework.
Given the proposed policy framework, the macroeconomic framework projects an annual increase of 11.3 per cent in the income per capita and an inflation rate of around 6 percent in the terminal year 2022-23.
The plan targets an average annual growth of 5 per cent led by dynamic and competitive large scale manufacturing (4.7 per cent), followed by productive and innovative services sector ( 5.6 per cent) and a vibrant and modernizing agriculture (3.1 per cent). Within agriculture, livestock leads the growth of productive and efficient, diverse and safe, profitable and climate resilient. The plan objectives include: (i) improvement in agriculture terms of trade by 30 per cent; (ii) making Pakistan a net food exporting country; (iii) reduction of food insecurity by 30 per cent and malnutrition by 30-50 per cent; and (iv) enhancement of non-farm sector contribution in rural income for rapid rural transformation.
This growth would require the rate of investment to go up from 16.7 per cent to 18 per cent of GDP, with private sector investment rising from 9.8 to 12 per cent of GDP and public investment declining from 4.8 per cent to 4.4 per cent of GDP. The plan envisages the national saving rate to rise substantially from 10.4 per cent to 16.8 per cent of GDP and the reliance on net external inflows to decline from 6.3 percent to 1.2 per cent of GDP.
The external sector of Pakistan has been facing multifarious challenges, including fast depleting foreign exchange reserves, balance of payment crisis, upsurge in debt and stagnation in growth in general among others. The plan envisages a progress growth in exports, which are targeted to increase from $ 24.8 billion in 2017-18 to $ 34.7 billion in 2022-23. It is also planned to contain imports wherever necessary, and the projections show imports increasing from $ 56 billion in 2017-18 to $ 56 billion by 2022-23. The objective is to reduce deficit in current account balance by 78.3 per cent during the plan period.
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