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Pakistan Plans to Increase Spending on Roads, Health 58%

May 28 (Bloomberg) -- Pakistan plans to increase spending on roads, education and healthcare by 58 percent in the next fiscal year to revive an economy hurt by floods and terrorism.

The government will spend 730 billion rupees ($8.5 billion) on so-called development projects in the year starting July 1, compared with a revised estimate of 462 billion rupees in the current year, Finance Minister Abdul Hafeez Shaikh said at a news conference in Islamabad today.

The government projects economic growth will accelerate to 4.2 percent next year, helping to create jobs and cut poverty. Pakistan was forced to slash spending in the current year by 35 percent from its original target to reduce the budget deficit, according to the country’s Planning Commission.

Growth in the South Asia’s second-biggest economy probably has slowed to 2.4 or 2.5 percent in the year ending June 30 from the targeted 4.5 percent, Shaikh said, as the worst monsoon flooding destroyed crops and militant attacks undermined foreign investment.

”Our economy is passing through a stabilization period after being hurt by floods, the security situation and rising inflation,” Shaikh said. ”Our focus for the next year is to control spending and increase revenue.”

The government will unveil the federal budget in parliament on June 3.

Pakistan plans to cut its budget deficit to 4.5 percent of gross domestic product from 5.5 percent of GDP in the year ending June 30, according to the Planning Commission.

The Planning Commission allocated 300 billion rupees for development projects in the coming year to the federal government, up from 196 billion rupees this year and 430 billion rupees to the provinces from 266 billion this year.

Pakistan’s federal government will spend 155 billion rupees on infrastructure including roads and railways, and 122 billion rupees on social services such as education and health, Shaikh said.

Pakistan is likely to spend 442 billion rupees on defense in the current fiscal year, about 14 percent of the total budget.

To contact the reporter on this story:

Haris Anwar in Islamabad at Hanwar2@bloomberg.net.

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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