Huge spending on Pakistan's infrastructure

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Farhan Bokhari, FT Syndication Service
ISLAMABAD: Pakistan will spend more than $7.0bn in the new financial year, which begins next month, on infrastructure such as roads, bridges and power lines, according to the prime minister.
The spending plan, unprecedented in Pakistan's history, is geared to deal with fast-growing demand from an economy now in its third year of recovery.
The government announced late last week plans to spend up to Rps520bn ($8.6bn, euro 6.4bn, £4.3bn) during the next financial year on national development, half of which is meant to be spent on infrastructure.
However, Shaukat Aziz, prime minister, told the Financial Times that state-owned corporations such as the Water and Power Development Authority, the main provider of electricity, and the Karachi Port Trust, which manages one of Pakistan's largest ports, will together spend an additional Rps220bn ($3.6bn) on developing infrastructure.
"There is growing pressure on our infrastructure. The Pakistani economy has doubled in just five years," said Mr Aziz. "We have already invested a lot but, as you can see, the demand is rising very fast."
Mr Aziz denied claims from opposition leaders that the government was significantly raising its public spending in an election year to win favour. He also denied the plan would put pressure on government spending. The fiscal deficit in the next financial year is projected to fall to 4.0 per cent of gross domestic product from 4.2 per cent.
"This plan has nothing to do with elections but everything to do with infrastructure. The rise in development spending is aimed at removing the bottlenecks that we currently face."
Sakib Sherani, chief economist for Pakistan at ABN-Amro, said the promised spending represented a jump in real terms but questioned whether the government would succeed. "One big issue is the extent to which the government will be able to undertake all of its plans. Pakistan has had a history of projects planned but not executed in time," said Mr Sherani.
Western officials in Islamabad said the spending plan could be derailed if political uncertainty mounted to the extent that it affected Pakistan's economic outlook. The opposition parties since March this year have rallied behind Iftikhar Chaudhary, chief justice of the supreme court, since he defied the government's move to force him out of office. Since then public protests surrounding Mr Chaudhary have given momentum to the anti-government movement.