EDITORIAL: Finance Minister Shaukat Tarin during his press conference this Sunday past defended the authenticity of the provisional 3.94 percent growth rate for the current year by stating that neither the Prime Minister nor he himself is supportive of data manipulation and urged those challenging the rate to confer with the Pakistan Bureau of Statistics (PBS) officials to reach a consensus. His statement has considerable merit given his past performance as the finance minister and one would hope that the PBS officials invite the naysayers to reach a consensus which is critical as it would strengthen the hands of the government to take informed decisions in a timely manner.
It may be recalled that in the first quarter of 2020 Dr Hafeez Sheikh, during a high-level meeting that he chaired, expressed his serious reservations on the data released by the PBS with special reference to inflation, however, repeated queries by Business Recorder as to what if any measures had been taken to deal with Dr Sheikh’s criticism elicited the response that no such instructions have been received by the Bureau. Thus to reiterate one would hope that even though PBS does not fall within the administrative control of the Ministry of Finance appropriate measures are taken by the Bureau to proactively engage with independent and well-respected economists disputing its data.
The question is what is the basis of the 4 percent growth rate for 2020-21 being challenged? Tarin claimed that there had been a spurt of growth backed by higher sales since January – a spurt that was sustained till April with May data not yet compiled. Sales of course do not always reflect higher productivity and may well be sourced to high inventories – an assumption that has merit given a dramatic decline in demand due to the pandemic – including high cost items like cars, and relatively low-cost items such as clothes and shoes. That demand resurfaced in recent months and a spike was witnessed till April, though one can assume that in May the nine-day Eid lockdown did dampen sales. Manufacturing growth for the first 10 months of the current year has been cited at 8.71 percent against negative 7.39 percent the year before which may therefore partly reflect higher sales and lower inventories and partly a rise given the very low base of the year before.
Tarin stated that farm produce had risen by more than the target and he mentioned cotton and wheat – which pulled up the agriculture growth rate to 2.8 percent (constant basic prices) against 3.31 percent the year before or in other words, growth in the current year has been shown as less than in the year before. Services sector, however, registered a major rise – from negative 0.55 percent last year to 4.43 percent in the current year – a rise which is significant and while details have not been provided one would assume that part of this rise is attributable to wholesale and retail trade – a view substantiated by the fact that collection of taxes on products rose from 25.5 billion rupees to 30.6 billion rupees and consumption expenditure rose from 38.2 billion rupees last year to 44.4 billion rupees during the first 10 months of the current year. Exports rose from 4.1 billion rupees to 4.7 billion rupees – a rise of 13.5 percent (again from a very low base) while imports rose by 20 percent. In this context, what is a source of concern is the fact that the PBS has taken one US dollar to rupee at 159.75 in the current year when this rate was applicable in February 2021 and has been much lower since.
Independent economists cite understating the growth rate for 2019-20 by negative 1.5 percentage points (the rate being negative 2 percent as opposed to negative 0.5 percent as noted in PBS calculations) which enabled the government to claim 3.9 percent growth in the current year whereas in actuality the growth rate is 2 percent in the current year if the previous year’s more accurate rate is taken into account.
Whatever the growth rate for the current year one may support, the fact remains that Tarin has taken charge of the Finance Ministry at an extremely challenging time and what was most disturbing about his press conference was the acknowledgment that the International Monetary Fund was “harsh” this time, no doubt indicative of his initial talks to revisit the conditions agreed by his predecessor, conditions that showed a complete lack of empathy with the people of this country.
There is therefore no doubt that the economic situation today is much worse than what it was in 2008 when Tarin as finance minister negotiated a programme with the IMF. At that time the country faced a deficit due to the Musharraf-led government’s decision to massively subsidise the price of petroleum and products which had sky-rocketed to over 140 dollars a barrel in 2007 in an unsuccessful attempt to win the 2008 general elections. But blame for the current state of affairs rests not only with Ishaq Dar’s flawed policies (a usual practice in the Khan-led administration) but also due to the complete lack of compassion for the general public by Tarin’s immediate predecessor as well as some extremely harsh conditions that had to be implemented by the State Bank of Pakistan pre-pandemic. We would wish Tarin success in his attempt to give a human face to the budget 2021-22 but the true test of his success would be on the scheduled budget presentation date of 11 June.
Copyright Business Recorder, 2021