Islamabad:
On Wednesday, the National Economic Council approved an expanded national development costs of RS3.9 trillion as some of the provinces have demanded to review the National Finance Commission and reopen the agricultural income tax problem with the International Monetary Fund.
The NEC approved the federal development program for the public sector 2025-26 shows the government’s political priorities to reassure allies and use more on roads. The approved reduced budgets for Pakistan’s space and nuclear energy programs, health and education, but increased allocations to SINDH-specific projects and parliamentarians’ schemes.
Led by Prime Minister Shehbaz Sharif also set NEC the economic growth target at 4.2% and inflation of 7.5% for the next financial year 2025-26. NEC is the nation’s constitutional body, which is mandated to approve the macroeconomic and development plans.
NEC also expressed concern about the growing population and showed a decision to find a solution as the economic growth of this financial year was almost equal to the population’s growth rate.
NEC approved RS1 trillion for the federal development program for the public sector and RS2.9 trillion for the provincial annual development plans. The cumulative budgets on RS3.9 trillion lapses the harsh fiscal policy soils as the federal government even went to the extent of further reducing some critically proposed allocations to make room for more politically oriented development costs.
Unlike its previous plan to award RS50 billion RS for discretionary expenses for parliamentary schemes, the allocation has been approved for RS70 billion. Not only that, the federal government further increased the costs of the provinces’ development project from three-day old allocation of RS93.4 billion to almost RS106 billion.
The room is created by further reducing the cost of health and education from the level approved by the annual plank coordination committee on Monday. The Higher Education Commission’s allocation is drastically reduced to RS39.4 billion, while the Ministry of Health’s budget is reduced to RS14.3 billion. To make room for political projects, the allocation to Power sector projects was reduced from the previously proposed RS104 billion to RS90 billion. But the award of the water sector has been increased to RS133 billion from previously proposed RS119 billion.
Compared to the budget approved by APCC on Monday, Space & Upper is atmosphere Research Commission’s (Suparco) budget reduced from RS24.2 billion to only RS5.4 Billon, while Pakistan Atomic Energy Commission’s budget is reduced from RS4.7 billion to RS781 million.
The budget is completed by a committee consisting of Deputy Prime Minister Ishaq Dar and PM’s political adviser Rana Sannuallah Khan.
Such large assignments to the provincial projects are contrary to obligations to the IMF to reduce federal expenses for provincial projects.
The sources said some of the NEC members discussed the growth of the low agricultural sector at only 0.6% in this fiscal year and called to change economic policy, including high costs for input. The participants at the meeting said that Sindh asked to review the agricultural income tax and take it up with the IMF.
Finance Secretary Imdad Ullah Bosal did not comment on the question of whether the Ministry of Finance will take up the matter with the IMF.
The four provincial governments have passed the new laws on agricultural income tax, but these have not yet been enforced. There is a great chance that the IMF would not entertain any such request.
The Khyber Pakhtunkhwa government took the question of delay in the reopening of the NFC price, as the provincial government requires a higher proportion in the light of the merger of the tribal districts. The Prime Minister assured the KP government to convene the NFC meeting in August.
However, the government has further reduced the KP -merger districts award from RS70 billion to RS65.4 billion approved by APCC on Monday.
The Punjab government raised the issue of higher taxes on the agricultural machinery.
NEC approved RS2.86 trillion for the four provincial governments with the highest cost of Punjab worth RS1.2 trillion. Khyber-Pakhtunkhwa will use RS417 billion. The Sindh government plans to use RS995 billion, and the Balochistan government proposes RS280 billion for development.
The proposed development distributions from the four provinces are about RS860 billion more than what the IMF has included in its plan. This means that either the provinces will not be able to use the entire allocation, or the IMF Cash Surplus goal will not be met.
NEC also reviewed the implementation of the annual plan for this fiscal policy and approved the financial targets for the next fiscal policy. It also took a review of the implementation of PSDP for the current financial year, noting the low utilization of the funds.
NEC also discussed the status report for the CDWP & scheme approved by CDWP and ECNEC in the last year. NEC approved the publication of the 13th five-year plan 2024-29 and approved Uraan Pakistan implementation frame.
Exports are expected at $ 35.3 billion, while foreign transfers are expected to exceed $ 39.4 billion in the next financial year. Imports are expected at $ 65.2 billion with a current account deficit, estimated at $ 2.1 billion for the next financial year.
Currently, 1,071 development projects with a total cost of RS13.4 trillion are under implementation. These projects require a further RS10.2 trillion to be completed, and the Ministry of Planning estimates that it would take more than a decade to end them all.
NEC also approved to publish the five-year economic plan 2024-29. NEC was told that 13 -year plan has been updated as a result of stakeholders’ consultations and is ready for publication
Five -year plan is aimed at a balanced regional and fair development, which improves the export orientation of the economy – lively SMES sector – social protection and poverty reduction – improves the quality of human resources – to move into the knowledge economy – adaptation and mitigation strategy to combat climate change.
The Prime Minister had launched ‘Uraan Pakistan’ on December 31, 2024, and NEC approved its implementation frame on Wednesday.
