ARTICLE: Lies, damned lies and statistics is an aphorism that many a professor of statistics cites to his introductory class, but if data and subsequent analysis contained in the Economic Survey 2019-20 is taken as a yardstick Pakistani official data gatherers and analysts have slowly but surely pushed the policy makers into an abyss where reality takes a back seat to back-slapping and sycophancy.
Hafeez Sheikh during the press briefing focused on the Covid-19 1.2 trillion rupees relief package (however exactly what was its additionality from what was budgeted would be revealed today in the budget documents) and laid the entire blame on the current state of the economy on Covid-19 with a little left over for previous administrations while insisting that the contractionary fiscal and monetary policies had achieved the objective of the International Monetary Fund (IMF) supported stabilization programme.
Ignored was the negative impact of stabilization policies on productivity and investment as GDP growth pre-Covid-19 was projected at 2.4 percent in 2020 against 3.3 percent in last year's Survey (provisional for the first nine months) but downgraded in the current Survey to 1.9 percent for the entire year. Total investment performed worse than last year at 15.4 percent (up to March 2020 pre-Covid-19) against last year's figure of 15.6 percent. And public investment in 2018-19 was downgraded from negative 7.9 to negative 21.6 percent in the Survey 2019-20. Private investment declined from 10.3 percent last year to 10 percent this year (so much for improvement in ease of doing business). This clearly indicates that during Asad Umer's tenure as Finance Minister (the first nine months of last fiscal year) and before the staff level agreement with the IMF on 12 May 2019 was reached growth rate and investment were higher than in subsequent months which brought the rates down.
Domestic debt was 22.47 trillion rupees till March 2020 as per the Survey. The rise in domestic debt during the Khan administration is significant - from 16.4 trillion rupees in 2018 to 20.7 trillion rupees in 2019 and 22.4 trillion rupees by March 2020 or a rise of 37 percent in just two years - an inflationary policy. External debt rose from 70 billion dollars in 2018 to 76 billion dollars by March 2020 or a rise of 8 percent due to single treasury account (an IMF condition), lengthening maturities, developing Islamic based borrowing and availing maximum available concessional financing (though borrowing from commercial banks abroad was 1.8 billion dollars for the first nine months against the budgeted 2 billion dollars.
An outstanding feature of the Survey 2019-20 is deliberate data confusion made possible by: (i) not presenting data for the entire year; for example the Survey refers to fiscal deficit of 4 percent July-March 2019-20 against 5.1 percent July-March 2018-19. The actual fiscal deficit for July-June 2018-19 was 8.9 percent and without Covid-19 the expenditure and revenue mismatch was rising by the day and conservative estimates of the current year's deficit projections were in double digits; Benazir Income Support Programme's allocation in 2016 was cited at 102 billion rupees against 180 billion rupees in the current year though the 120 billion rupees allocated in 2019 would have been a more useful comparison; (ii) the divergence of data projected by the government in May 2019 for fiscal year 2018-19 and which formed the basis for the 12 May 2019 staff level agreement with the IMF, and the actual data released by the government in the Consolidated Budgetary Operation statement on 28 August 2019 for the previous year: budget deficit in May 2019 was forecast at 7.2 percent for 2018-19, and revised upward to 8.9 percent in August reflecting lower tax revenue (by over 400 billion rupees), lower non tax revenue (SBP profits were lower by a whopping 268 billion rupees), and higher current expenditure (by 2.3 trillion rupees). This dramatically changed the base on which the agreement with the IMF was reached making the attainment of agreed targets unrealistic; (iii) the divergence of Survey projections from those made by multilaterals. The GDP growth rate of negative 0.38 percent is significantly lower than the projected growth rate of negative 1.5 percent by the IMF and negative 2.6 percent by the World Bank; Dr Hafeez Sheikh rationalized it by stating that the pandemic has created considerable uncertainty therefore any projection of any key macroeconomic indicator for the current year is not conclusive; and (iv) agriculture growth was 2.67 percent, against the target of 3.5 percent with locust attack and not the pandemic cited as the major contributor. However, the locust attack has been understated and it must be borne in mind that the attack continues to this day; additionally, the impact of lower farm output, a major input for industry, would negatively impact on growth for next year.
While one would expect any government to overstate its achievements yet Survey 2019-20 makes an attempt to downgrade some major achievements during the Asad Umer's tenure as the Finance Minister and lay the entire blame on the pandemic and on previous governments. It is high time the Khan administration acknowledges responsibility for the state of the economy after 22 months in power.
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