Public sector development programme gets "unprecedented" boost in funding

A Public Sector Development Programme (PSDP) worth Rs. (rupees) 202 billion (US $3,628,460,060) was approved by Pakistan's National Economic Council (NEC) on Tuesday, with a senior Finance Ministry official calling the package, which represents a 26 percent increase over last year's figures, "unprecedented". The NEC is the country's highest decision-making body. Mir Zafarullah Khan Jamali, the Pakistani prime minister, chaired the meeting at which the council decided to allocate Rs. 148 billion ($2,658,475,688) to the federal PSDP, while Pakistan's four provinces were allotted Rs. 54 ($969,984,372) billion. "We have made a conscious effort to increase public sector spending," Dr. Ashfaq Hassan Khan, the economic adviser to the Finance Ministry, told IRIN in the capital, Islamabad. "And most of this spending will go towards [improving] infrastructure and the social sector - these are the two important areas the bulk of this federal government public sector programme will go towards," he explained. According to Khan, Rs. 87 billion ($1,562,752,600) of the federal programme will be focused on improving infrastructure, while Rs. 34 billion ($610,730,901) will go towards social sector development. "The total for these comes to about Rs. 121 billion ($2,173,483,501), out of the Rs. 148 billion ($2,658,475,688) allocated for the federal programme, which is unprecedented," he said. "You need to measure public sector spending. And empirical evidence shows that public sector spending or investment leads to 'crowding in' of private investment. So if the public sector is spending more, the private sector will come in and they will also spend more," the economic advisor explained. "Then, the overall investment will increase and it will sustain a growth of 6.6 percent which we have envisaged for next year," he added. All the figures approved by the NEC represent an increase from last year's statistics, Khan maintained. "The growth rate has improved from last year. This year, it is 6.4 percent. And the total size of the PSDP is about 26 percent higher than last year," Khan stressed. Pakistan needed to spend more on infrastructure because it was setting itself higher growth targets over the next few years, the official said. "Next year, we're planning for 6.6 percent growth, then, we'll be targeting 7 and then 8. So, in order to sustain this growth's momentum, we need to spend on infrastructure more today," he said. In April, a former secretary of the Planning Commission of Pakistan told IRIN that he thought the country's economy - which was branded as having hit "rock-bottom" by President Pervez Musharraf when he assumed power in late 1999 - could perform much as it did in the 1980s when it regularly crossed the 6 percent growth threshold. "Pakistan's improved economic performance could be attributed to better management and better policies," Dr. Akhtar Hassan Khan said at the launch of the United Nation's Economic and Social Commission for Asia and the Pacific's (UNESCAP) annual survey.