EDITORIAL: Pakistan Bureau of Statistics (PBS) data integrity is increasingly being challenged by the general public through a rising number of protests launched by different groups in the federal capital as well as around the country. The government froze public sector and defense personnel salaries in the current year with the objective of containing the unsustainably high budget deficit of 9.1 percent in 2019-20 but the July-November figures released by the ministry of finance in January 2021 indicate that the budget deficit has risen from 566 billion rupees in 2019 to 666 billion rupees in the comparable period of this year – a rise of 21.1 percent.
The private sector suffered a major contraction in 2019-20 pre-pandemic due to the inexplicably rigid upfront contractionary policies agreed by the government under the International Monetary Fund programme, with a projected low GDP growth of 1.5 percent and inflation of 13 percent. This led to downsizing in the private sector and compromised the capacity of retained staff to absorb inflation.
Policies have only partly been reversed post-pandemic as today the discount rate is at 7 percent (with CPI at 5.7 percent and core inflation at 5.4 percent) with a revenue target of 4.9 trillion rupees which the government claims will be met however its reliance on-non tax revenue has ominously risen considerably from what was budgeted this year – by a whopping 17.7 percent July-November 2020 in comparison to same period the year before without any clarification as to the source of this raise.
The government extended favourable terms to specific sectors post- pandemic, particularly the construction sector that received monetary and fiscal incentives including an amnesty scheme. These incentives were successful so claimed the government citing PBS data as proof with large scale manufacturing sector growing by 7.4 percent July-November 2020 (though the base was appallingly low given negative 24.8 percent growth April-June 2020) with the Prime Minister stating that the textile sector had complained of a labour (technical) shortage thereby concluding that the economy had jump-started post pandemic.
The SBP website indicates that cement sales rose dramatically – from 1.64 percent in July-November 2019 to 21.3 percent in the comparable period of 2021 while cement exports declined from 808,874 to 694,934 tons. However, the rise in demand for cement was accompanied by a rise in cement prices – by 20 rupees per bag in December with sector experts stating that with the rise in coal prices to an average of 60 dollars per ton compared to 55 dollars per ton cement prices are expected to rise further by 10 percent year on year which in turn would raise the cost of housing.
Iron and steel products used in later stages of construction continue to register negative output – from negative 13.82 percent in 2020 to negative 3.69 percent in 2021 (though billets/ingots rose from negative 28.51 percent 2020 to positive 33.48 percent in 2021); however, BH/CR Sheets/Strips/Coiled/plates, etc., registered negative 1.04 percent in July-November 2019 and negative 27.04 percent in 2020.
Other SBP credit data is as follows: (i) credit to government sector (SBP and scheduled banks) rose from 12,396,080 million rupees in June 2019 to 15,178,639 million rupees in December 2020, (ii) credit to private sector rose from 6,086,628 million rupees in June 2019 to 6,514,830 million rupees December 2020 including credit to public sector entities of 1,560,872 million rupees in June 2019 to 1,66,5258 million rupees December 2020; and (iii) credit to textile sector was 919,578 million rupees in June 2019 and rose to 1,123,814 million rupees December 2020 (rise of 22 percent that may indicate export orders diverted from Covid19 ridden India to Pakistan).
The Prime Minister cites PBS data reflecting a significant decline in the Consumer Price Index to 5.7 percent for January 2021 from 8 percent in December 2020 – a month when the government deemed it appropriate to: (i) raise the price of petroleum and products twice with nearly 40 percent of the amount paid by consumers as tax – petroleum levy was raised and collections of sales tax increased as the price increases; and (ii) electricity tariffs were also raised in January due to not only a raise in fuel adjustment charges (the onus of which may be placed on the international price of oil, which cannot be blamed on the government, but also on the rupee-dollar parity monitored by the State Bank of Pakistan to ensure there are no disorderly market conditions which, unsurprisingly, appeared to be of concern to the apex bank when the budget deficit rose from 1.6 percent in the first six months of 2019 to 1.8 percent in the comparable period of the current year. However, the weightage of these two items combined is 6, which implies that while its impact on the householders disposal income as well as in input costs of the productive sectors is significant yet their impact is negligible on inflation.
There is growing discontent with the federal public sector employees threatening strike action from 10 February unless their salaries are raised with householders periodically expressing their anger at the rise in prices. Inflation may well emerge as the PTI government’s Achilles heel and as a first step there is an emergent need to grant full autonomy to the PBS and strengthen its technical staff to enable the government to take more informed timely decisions with credible data.
Copyright Business Recorder, 2021
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