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Govt approves $9.36bn oil import bill for coming budget

Posted on 06 Jun, 2009

ISLAMABAD: The government has approved projection of the oil import bill to the tune of $9.365 billion in the upcoming budget for 2009-10 against revised estimates of $9.858 billion in the outgoing fiscal year 2008-09.

According to a summary for Annual Plan 2009-10 approved by the National Economic Council (NEC), a copy of which is available with The News, the government had estimated an oil import bill of $13.669 billion on eve of budget 2008-09, which was scaled down in accordance with revised estimates to the tune of $9.858 billion, owing to reduction in international prices of POL products.

Now the oil prices have started witnessing a surge in the international market, touching an average price of over $60 per barrel. But the government has projected oil import bill of $9.365 billion for 2009-10.

The Annual Plan 2009-10 envisaged GDP growth at 3.3 per cent, while inflation target is set at 9 per cent in the next budget. In real GDP growth of 3.3 per cent, the contribution of agriculture will be 3.8pc, manufacturing 1.8pc and services 3.9pc. GDP at the current market price would increase by 12.9 per cent as it would touch Rs14779 billion.

The target rate for CPI inflation is set at 9 per cent for 2009-10 against expected inflation of 20 per cent in 2008-09. This projection has been made in view of the improvements in macroeconomic indicators and weakening international oil and commodity prices, the summary states.

Total investment is projected to be around 20 per cent of the GDP in 2009-10. National Savings as a ratio to GDP is projected at 14.7 per cent, implying that almost 74 per cent of investment will be financed through national savings. This will leave 26 per cent of the investment to be financed from foreign savings, which will be 5.3 per cent of GDP.

Fiscal policy for 2009-10, the summary states, would be to keep the fiscal deficit within a sustainable limit by furthering reforms in tax system, broadening its base, improving tax compliance and minimizing evasion.

The main objective of this policy would be to allocate adequate resources for development activities, particularly for pro poor expenditures, in conformity with the Fiscal Responsibility and Debt Limitation Act, 2005, to achieve the projected economic growth of 3.3 per cent, reduce unemployment and poverty, and improve social indicators, the summary states.

Monetary expansion for the year 2009-10 will be in line with the projected GDP growth of 3.3 per cent and CPI inflation of 9 per cent. To keep M2 growth rate in the vicinity of the targeted level and to encourage private sector credit, it is imperative that government borrowing should be limited to a safe level. This will help in bringing down CPI inflation and strengthening growth prospects of the economy. On account of the global economic slowdown, and due to the domestic energy and law and order situation, exports for 2009-10 are projected to slightly increase to $19.9 billion against $19.5 billion estimated for 2008-09.

Imports during 2009-10 are estimated to decrease by 5 per cent to $28.7 billion from $30.2 billion in 2008-09. As a result, the trade account is projected to be in deficit by $8.8 billion in 2009-10.

Prospects for an invisible balance will continue to be governed mainly by the behavior of remittances, which are projected to be around $7 billion for 2009-10 compared to the estimated level of $7.2 billion in 2008-09.

The current account deficit is targeted at $9.5 billion in 2009-10 compared to the estimated deficit of $9.357 billion for 2008-09, the summary added.