NEC approves Rs 541 billion PSDP: 5.5 percent GDP growth target fixed for 2008-09


ISLAMABAD (June 03 2008): The National Economic Council (NEC) on Monday scaled GDP growth down to 5.8 percent for the current fiscal year, and 5.5 percent target for 2008-09. The NEC, which met here with Prime Minister Yusuf Raza Gilani in the chair, approved Rs 541 billion Public Sector Development Programme (PSDP) for 2008-09. It includes Rs 371 billion of the federal government and Rs 170 billion of the provinces share.

It has a shortfall of Rs 45 billion. The NEC also decided to keep the public aware of the facts to give the real picture of the economy. One of the participants stressed for speaking all about truth on economy. He said: "Instead of bluffing, let's be truthful to the nation of the factual economic situation". His approach was well taken by others.

Planning Commission Deputy Chairman Salman Faruqui told NEC that 2008-09 PSDP marked a sharp change in direction for immediate relief to the poor, and especially the poorest of the poor. He said the PSPD would focus on physical and social infrastructure projects for sustainable and equitable growth.

The NEC meeting was told that the economy was facing a difficult time. The economic growth has declined to 5.8 percent, against 7.2 percent target. Inflation has reached double digits with food inflation at 15 percent. Trade deficit has reached 15.2 percent of GDP and fiscal deficit has reached unsustainable levels. Exchange rate is under increasing pressure. To protect against sharp increases in international prices, the government is providing subsidy of Rs 1.2 billion per day.

The PC Deputy Chairman said that this economic situation was the result of 'flawed' policies and 'inaction' of the past government. He gave the examples of lack of supporting policies for the poor, power shortage and the wheat crisis. He listed following 5 priorities for PSDP.

a. First, providing a comprehensive safety net against severe hardship faced by the poor and vulnerable groups.

b. Second, overcoming the energy and water crisis in a planned and systematic manner.

c. Third, highest priority to the development and uplift of Balochistan and NWFP and Special Areas (FATA, AJK, Northern Areas).

d. Fourth, reviving growth in agriculture and manufacturing so as to overcome food shortages and generate vitally needed incomes and employment.

e. Fifth, building up human resources at all levels of education including technical education.

THE PRIME MINISTER'S INITIATIVES PROGRAMME FOR POVERTY ALLEVIATION:

-- Income support fund Rs 34 billion

EMPLOYMENT & SKILLS DEVELOPMENT:

-- 'Hunarmand Pakistan' 2 billion.

-- Placement bureaus 10 million.

RURAL DEVELOPMENT: White revolution Rs 500 million. Village product specialisation, Rs 500 million. Cold chains Rs 10 million.

HEALTH SECTOR: Doubling lady health workers Rs 3.5 billion. Expansion & upgradation of BHUs, Rs 500 million.

HOUSING: housing for All: Revolving fund of Rs 10 billion, Rs 2 billion. Real estate investment trust Rs 300 million.

IMPROVING GOVERNANCE: Video conferencing facilities, Rs 100 million Promoting paper less governance, Rs 100 million.

SECTORAL ALLOCATION: The Social sectors have been allocated Rs 188 billion, 12 percent higher than 51 percent of the last year.

i) Infrastructure has been allocated Rs 166 billion, 45 percent.

ii) Power sector has been allocated Rs 14 billion, Rs 51 billion to be spent by Wapda from its own resources.

iii) Water sector has been allocated Rs 75.0 billion.

iv) Food, agriculture and livestock allocated Rs 20 billion.

v) Transport and communication sector has been allocated Rs 61.0 billion.

vi) Higher education has been allocated Rs 18.0 billion.

vii) Special Areas (AJK, northern areas and FATA) allocation increased to Rs 23.3 billion.

REVIEW OF ANNUAL PLAN 2007-08: GDP growth of 5.8 percent against the target of 7.2 percent.

Agriculture sector growth turned out to be 1.5 percent against the target of 4.8 percent. Manufacturing sector grew by 5.4 percent as against the target of 10.9 percent Services sector with 8.2 percent exceeded the target of 7.1 percent. Total investment as a ratio to GDP declined from 22.9 percent in 2006-07 to 12.6 percent in 2007-08.

Foreign private investment during July-April amounted to $3.6 billion against $5.3 billion during the same period last year. Inflation rate went into double digit, amounting to 10.3 percent with food inflation mounting to 15 percent. Export and imports in dollar terms registered growth rates of 15percent and 28.6 percent respectively. Worker's remittances are expected to be around $6.6 b billion during the whole years. Current account deficit is estimated to be $14.1 billion (5.1 percent of GDP).billion (8.3percent of GDP) against $7.4



Link

WTF!!! I hope the journalist made a typing error. If the investment rate stays at 12%, Pakistan economy will struggle to even grow at 3%

Dang thats terrible, even bangladesh is prdicted to grow its GDP by 6.5% next year.
If the economy grows at 5.5% then GDP will double in 12.7 years (rule of 70. 70/5.5=12.7). Thats not good. If indian economy grows at 8% (underestimate) then it will double in 8.75 years.

what does 70.70 means, rooh afza ?

means you add up the yearly growth rate of GDP and when the sum equals 70 then your GDP would have doubled, since the growth is compounded.

I think roof afza is refering to the Rule of 72

If you take 72 and divide it by the growth rate it roughly gives you the lenght of time to double the value

http://www.moneychimp.com/features/rule72.htm


eg 10% economic growth, time to double GDP = 72/10 = 7.2 years
7.2 % economic growth time to double GDP = 72/7.2 = 10 years

Thank you for clarifying. Here is a further clarification of the Rule of 70, 72, and 69.3:

In finance, the rule of 72, the rule of 71, the rule of 70 and the rule of 69.3 are methods for estimating an investment's doubling time or halving time. These rules apply to exponential growth and decay respectively, and are therefore used for compound interest as opposed to simple interest calculations.

To determine the time for money's buying power to halve, financiers simply divide the rule-quantity by the inflation rate. Thus at 3.5% inflation using the rule of 70, it should take approximately 70/3.5 = 20 years for the value of a unit of currency to halve.

The value 72 is a convenient choice of numerator, since it has many small divisors: 1, 2, 3, 4, 6, 8, 9, and 12. However, depending on the rate and compounding period in question, other values will provide a more appropriate choice.


The rule of 72 provides a good approximation for annual compounding, and for compounding at typical rates (from 6% to 10%). The approximations are less accurate at higher interest rates.


For continuous compounding, 69.3 gives accurate results for any rate (this is because ln(2) is about 69.3%; see derivation below). Since daily compounding is close enough to continuous compounding, for most purposes 69.3 - or 70 - is used in preference to 72 here. For lower rates than those above, 69.3 would also be more accurate than 72.

Rule of 70 better, Rule of 72 is better in finance, and Rule of 69.3 is the most accurate, heres why:

The heuristic tool the "Rule of 70" is derived from the Natural Logarithm of 2, which is 0.693147. When dealing in percentages, this becomes 69.3147. You will find an occasional reference to the more accurate Rule of 69.3 (or the Rule of 69), but both the Rule of 70 and the Rule of 72 are far more widely used.

The Rule Of 70 is normally explained only in terms of positive growth rates. It can be stated thus: if you divide the growth rate (expressed as a percentage) for a given period into 70 then you will get the crude population doubling period for that population (expressed in the same time units as used for the rate).

In finance, the Rule Of 72 is used in a similar fashion, except that you divide the rate into 72 rather than 70. Rather than obtaining a population doubling period, you would typically calculate an investment doubling period. In finance, the Rule Of 72 is probably used in preference to the Rule Of 70 as 72 has more whole number divisors (72, 36, 24, 18, 12, 9, and 8) than 70 (70, 35, 14, 10, and 7).

meh ...

Anyways, 5.5% is the target.

Expect these monkeys to miss it by a good 2%, so the economy will grow by no more than 3.8%

and then accomodate for obvious fudging of figures .... so expect it to be no more than 2% ...


lets face, this govt can't give 2 shits about the economy or for that matter the country. I think Zardari actually already said just that

No that is not a typo last year it was ~13.7%, this is the anamoly that a lot of critics are pointing to. Paksitan is prolly only country whoes economy is growing but savings are consistently coming down. Which can't be true so some where some one needs to fix the figures and most likely fixing would be reduction in GDP size.

Tim it seems you are wrong again, and I was correct. This was a typo.

Infact the Investment rate fell from 22.9% to 21.6% (rather than to 12.6% as the article said)

http://www.app.com.pk/en_/index2.php?optio...=1&id=40137



Tim it seems like you know absolutely nothing about Pakistans economy as I showed in this previous thread
http://pakistanidefenceforum.com//index.php?showtopic=76082

You are an informed and resourceful man could you please post savings and investment rate for Pakistan starting from 1998 to 2008. It is not my purpose to discredit previous govt of pakistan or deny the economic growth during those years which is visible to all. The purpose of my inquiry is to find how that growth was achieved and how it compares with empirical records and its contemporary peers. Growth is nothing but a return on investment which is simpler/easier to do (buying the growth). The real issue is where that money came from and is it a sustainable source of money stream for continued future growth for Pakistani economy or next govt would have to bear the burden of footing the bill.

I have figures for GDP savings in bits and pieces-

2000-01 17.8% of GDP
2001-02 18.1%
2002-03 17.6%
2003-04 15.7%
2004-05 14.5%
2005-06 14.4%
2006-07
2007-08 13.9%

I have a few years figure for investment rates. Let’s get the data for savings, investment and GDP size for these years than we can have a reference line for informed discussion. You are right I have little information on pakistani economy and hard data is hard to come by in whatever little time I can devote to this topic.

Comprehensive data on investment rate, saving rate, GDP growth and the contribution of different factors to economic growth can be found in following economic surveys. They contain invaluable data.

http://www.accountancy.com.pk/reference_other_pubs.asp

Maybe after you have had a chance to read these, you might be able to make informed judgement about Pakistans economy rather than quess work

5.5 percent GDP growth for 2008-09 not realistic

ISLAMABAD (June 09 2008): The National Economic Council (NEC) has fixed exaggerated GDP growth target at 5.5 percent for 2008-09, basically for boosting the nation's moral up in the ongoing political turmoil and imminent economic slowdown.

Sources said that NEC, which met here on June 2, with Prime Minister Syed Yusuf Raza Gilani in the chair, held threadbare discussion on GDP growth rate achieved in 2007-08, and projected for the next fiscal year.

They said State Bank of Pakistan (SBP) Governor Dr Shamshad Akhtar was highly critical to what she declared 'Unrealistic approach' towards GDP growth. The National Economic Council had scaled GDP growth rate down to 5.8 percent for the current fiscal year, besides setting 5.5 percent target for 2008-09.

The SBP governor contested the GDP growth rate for the current fiscal year as well as the next one. She claimed that achieved GDP growth rate in 2007-08 was less than 5.8 percent. She demanded that instead deceiving the nation by setting exaggerated target the government should come up with a realistic and accurate GDP growth rate for the next fiscal year.

The SBP governor said: "Setting of incorrect GDP growth target when all the economic indicators were showing negative growth would not serve any purpose."

Dr Shamshad Akhtar's viewpoint was seconded by many others in the meeting. Those who supported her on the issue also demanded realistic and achievable GDP growth target for 2008-09, besides announcing actually achieved for the outgoing fiscal year.

The government had initially set GDP growth target for the current fiscal year at over 7 percent. However, after dismal performance of major sectors of the economy in the first half of the current fiscal year the target was reduced to 6.5 percent. The NEC further reduced it to 5.8 percent for the current fiscal year.

The World Bank and the International Monetary Fund (IMF) also have been questioning the official GDP growth rate. The officials of both international donor agencies, who visited Islamabad just a few days before the NEC meeting, doubted that Pakistan was doing good enough to help it achieve even over 5 percent GDP growth rate in 2008-09. An IMF fact-finding mission, which visited Pakistan from June 17 to 28 sharply disagreed with the government officials on the GDP growth rate. Its mission claimed that Pakistan's growth rate was even less than 5 percent this year.

Will soon be replaced with Zardari's chaprasi ... or if we are lucky ... his sister

Well those figures that I was quoting (from dawn) were correct (except for revisions). The new survey is out and savings rate has come down to 11.7% of GDP which puts pakistan at below sub-Saharan levels. That can't be true as signs of economic progress are visible every where which only points towards anomaly in data reporting.


Another thing that stands out is the gap between total investment (21.6% of GDP) and domestic savings (~12-16% of GDP) which is being filled by foreign savings.

CIA Fact book which uses independent models to calculate GDP sizes (unlike WB, ADB, IMF etc who only report official data as produced by host country) puts Pakistan's GDP size at $106Billion in 07. If their calculated figure is right than it fixes all other data points to normal levels for instance Domestic savings rates would come to 25-27% of GDP which matches (normalized for its GDP size)with Pakistan's peer like Sri Lanka, BD, India and China

In short I suspect that Pakistan's GDP is/has been growing almost as fast as being reported in official media but on a smaller base. That base adjustment may be at fault….

If this govt chooses not to fix the size of GDP (which your new finance minister thinks is suspect) than only other way would be to allow massive inflation to creep in and cause the currency depriciation till the size is adjusted in due course.

Economic Survey of Pakistan -2008

Great, look at the great successes Zardari and Nawaz have bestowed upon Pakistan a measly 5.5% GDP growth for this year. This is really bad.

Hopefully we can churn up GDP gorwth of over 7% again as we did under Musharraf. All this comes to show the ineptness of the new government.
Yep the 72 rule can be quiet useful when working with GDPs.

Who knows maybe we may surpass the target and continue achieving the growth rate of above 6-7% dont be surprised if this happens, but then again things could just get worse

5.5% growth with 11% inflation is disastrous; they should have aimed for 3% growth with 3-5% inflation to ensure long term growth prospects were not jeopardized. Previous govt’s exorbitant spending, to buy growth instead of creating a sustainable growth platform with roots embedded in domestic savings, has done the damage that this govt must undo. It seems this bunch would be at least as much incompetent and limited by domestic/international pressure politics as the last bunch although in their own ways.

True, there is the possibility that this growth target is overly conservative and Pakistan may continue acheiving a growth rate of around 7%.