DEVELOPMENT PROGRAMME OF PAKISTAN

17. As can be seen, the internal resources for financing investment consist of the total savings that can be made available by individuals and private enterprises on the one hand, and by public authorities and public enterprises on the other. A recent investigation was made by a Committee of officials, industrialists and bankers into the rate of saving in Pakistan, and they estimated that the rate would be about R5.200 million annually, or Rs. 1,200 million over the six-year period, taking into account the expectation that the annual rate of savings will slowly increase as incomes rise. In a relatively undeveloped country such as Pakistan, with a low national income per head, savings are inevitably far below those in more advanced countries. Thus the internal resources which can be tapped through borrowing are very limited. There is also very little scope in Pakistan for increases in taxation. The scale of taxation prevailing before partition has been maintained and in addition, estate duties have been instituted. Rates of income tax and customs duties are already high. It is considered that to raise taxes further would discourage investment and hinder trade. An extension of export duties would tend to raise the price of Pakistan exports and prejudice its foreign trade. However, as incomes rise, it is considered that there should be some increase in public revenue from existing taxes and some economies in public expenditure ; taking these factors into account, it is estimated that R5.500 million will become available from public sources for financing investment over the period. Thus, to finance total investment of R5.3,050 million, it is estimated that some Rs. 1,700 million will be available from internal sources both private and public. The rate at which these internal resources will become available is assumed to increase progressively over the period and emergency expenditure on the maintenance of refugees is expected to be on a declining scale. To carry out the total investment programme, the Government of Pakistan expect that it will therefore be necessary to run a balance of payments deficit of Rs. 1,350 million over the six-year period, of which a small part will be required to finance Pakistan's imports of emergency supplies for the resettlement of refugees. 18. The balance of payments of Pakistan is at present in deficit In 1949-50 the deficit was R5.312 million (£36 million). For 1950-51 it is estimated to be R5.230 million (£25 million). This is mainly due to special factors which are not likely to recur, more especially a loss of export earnings and heavy expenditure on the rehabilitation of refugees. Apart from the financing of the development programme, the Government of Pakistan intended to bring the present deficit within more manageable limits and to wipe it out entirely during the course of the next year or two. As a result of the development programme, however, a balance of payments deficit totalling Rs. 1,350 million over the six-year period is expected. It is considered that this will rise to a peak in 1952-53 and will fall gradually towards the end of the period. To finance the total deficit, the Government of Pakistan intend to rely to the extent of R5.150 million on the use of their existing sterling balances. The remainder of the deficit will require external finance of R5.1,200 million from other sources. 19. During the six years the structure of trade is expected to change. There will be, on the one hand, an increase in exports, made possible by the rising production in various sections of the economy ; on the other hand, the developmental imports under the plan will increase and then fall again towards the end of the period. An increase in general imports will be made possible by the expansion of exports. The composition of imports will change as a result of the implementation of the development plan

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