ISLAMABAD: The government is targeting slight improvements in savings and investments, coupled with better performance by agriculture and industry to achieve an economic growth rate of four per cent during the next fiscal year, compared to a dismal growth of 3.3pc during the current fiscal year.
According to budget documents, the government is setting a target of total investment-to-GDP ratio at 15.8pc for the next fiscal year, slightly higher than the current year’s provisional rate of 15.4pc that is significantly lower than 17.2pc target. Of this, the fixed investment-to-GDP ratio is targeted to increase to 14.2pc from the current year’s missed target of 15.6pc. The fixed investment during the current fiscal year is provisionally anticipated at 13.8pc.
Public sector investment is estimated to stay almost unchanged at 4.1pc of GDP during the next fiscal year from the current year’s actual rate of 4pc — way behind the 4.8pc target. Likewise, the target for national savings-to-GDP ratio is set at 13pc for the next fiscal year, compared to the current year’s provisional estimate of 11.1pc that fell significantly behind the 13.1pc target.
As such, investments and national savings would be impacted by the government’s tight fiscal and monetary policies in line with its commitments with the IMF as prior actions to qualify for a $6 billion 39-month programme. Improvements in investment, savings envisaged
The documents suggest that the fiscal policy 2019-20 will envisage “containing fiscal deficit, controlling current spending, additional resource mobilisation and targeted subsidies while prioritising development spending”. The monetary policy will be “contractionary” aimed at supporting adjustment process to restore macroeconomic stabilisation and managing aggregate demand. The real test will be to “strike a balance between growth and stability in a manner that monetary policy tools may not suffocate growth while containing inflationary pressure”.
Therefore, the government is projecting next fiscal year’s inflation at 8.5pc on the basis of rising commodity prices and second round effect of depreciation and base money creation during the current year.
The size of the national economy is estimated to go up by about 12.9pc to Rs43.5 trillion next year from Rs38.56tr during the current year. Net indirect taxes are projected to increase by 13pc to Rs2.95tr next year from Rs2.6tr this year.
Foreign inflows are estimated to decline by about 26.5pc to Rs1.227tr next year despite the IMF programme, compared to Rs1.66tr external resource inflows during the current year. Total consumption is estimated to cost Rs40.88tr next year, up 11pc from Rs36.77tr this year.
