Irrigated agriculture in Pakistan is under immense pressure because of emerging challenges of food security, competing demands among sectors and climate change. The supply side solutions have been either exploited or difficult to pursue due to cost and other socio-political factors. On the other hand, demand side measures remained limited to improving water conveyance efficiency. This option has been tested for last four decades, yet the actual water saving could not be determined as much of the water saved in this way comes at a cost of diminishing aquifer recharge and downstream return flows.

The Annual Plan 2012-13 has been prepared focusing on issues of energy, water, food and internal security, human development, software to growth, PSEs & civil service reforms and provision of critical infrastructure. The Plan highlights growth, macroeconomic & price stability, balance development, social protection for the poor and implementation of PSDP through Result Based Management. The Annual Plan 2012-13 targets growth of GDP at 4.3% with contribution of agriculture at 4.0%, manufacturing at 4.1% and services sector at 4.6%. Fiscal and external accounts would be improved that would also enhance savings and investment.

Growth and development has remained unsustainable in Pakistan because of lack of sufficient physical and social connectivity, and inefficient use of software of economic development that drives the growth rate of per capita income, on sustained basis. Software of economic growth includes better organisation of institutions, effective governance mechanisms, optimal allocation and efficient management of physical infrastructure, and development of human capital that is in line with globally successful experiences.

The strategy is based on sustained reform that builds efficient and knowledgeable governance structures, and markets in desirable, attractive and well-connected locations. It recognises the severe resource constraint that the country faces and therefore focuses on 'productivity'— improving the efficiency with which assets are used. Global indicators such as 'competitiveness' and 'cost of doing business’ also highlight factors such as 'management', 'innovation', 'quality of regulation and governance" and 'research and development', as the more immediate constraints to growth. The thrust of this strategy, therefore, is to focus on the 'software' of economic growth (issues of economic governance, institutions, incentives, human resources, etc.)

The most important pillar of food security is sustained agricultural growth. Pakistan has, in fact, achieved a growth of over 4% per annum in the past three decades (1970–2000) following the introduction of new high yielding varieties of wheat and rice in the 1960s, combined with larger supplies of water and fertilizer. But in the period 2000–2008 the pace of agricultural growth has slowed down to less than 3% because of many structural and administrative weaknesses.

Growth Strategy of the Annual Plan 2011-12 has been derived from the Pakistan: Economic Growth Framework recently formulated by the Planning Commission. The Framework envisions effective participation of the private sector in the development process. Government would gradually withdraw its role as a direct participant in the economy and be the facilitator and regulator. Free forces of market are to be allowed to determine effective allocation and utilization of resources.

The unprecedented monsoon floods in July-August 2010 caused extensive human suffering and damage to social and economic infrastructure across Pakistan. The floods affected 20 million persons, damaged 1.6 million homes, rendering 7.3 million people homeless. Floods inflicted heavy losses to agriculture and extensive damage to roads, bridges, irrigation, railways, electricity, gas lines and education, health, water and sanitation facilities. Rescue and recovery activities elicited enormous response at home and from abroad. Damage and Needs Assessment (DNA) survey, conducted by World Bank and ADB, estimated damage at Rs 855 billion.

The Annual Plan 2010-11 envisaged macroeconomic stability and economic growth amid signs of global economic recovery. The economy was planned to grow at 4.5%. At the onset of current fiscal year, the economy faced the problems of energy shortage, circular debt in power sector, high subsidies and loss making public sector entities. The flood 2010 inflicted a loss of Rs 855 billion to the national economy. The federal and provincial governments had to divert resources to provide rescue, relief and rehabilitation work to the flood affected areas.

To develop a credible stabilization program for achieving macroeconomic stability which ensures a respectable growth rate and is both efficient and equitable. Principles of proposed stabilization package: emphasis on mobilization of domestic resources, adjustment with a human face, demonstration of ability to use resources well, integrated strategy.

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