Mark Twain wrote, “figures often beguile me particularly when I have the arranging of them myself, in which case the remark attributed to Disraeli would often apply with justice and force: ‘There are three kinds of lies: lies, damned lies, and statistics.’” Disraeli, a Conservative, served two terms as the British Prime Minister.
Lies, damned lies and statistics constitute a maxim that assumes great relevance when a government’s argument is weak. In Pakistan statistics tabulated by several government entities particularly the Pakistan Bureau of Statistics (PBS) - under the administrative control of the Ministry of Planning, Development, Reforms and Special Initiatives at present whereas previously it was attached to the Ministry of Finance - can be categorized as either: (i) deliberate manipulation that is patently evident to a statistician/economist as it is not backed by supporting data, a type of manipulation associated with non-economists including Shaukat Aziz and Ishaq Dar; and/or (ii) a more informed manipulation as evident from Dr Hafeez Sheikh’s decision in 2010-11 to reduce the weightage of food in the calculation of the Consumer Price Index (CPI) by six points that dramatically reduced the inflation estimate over-night though it did little to convince the general public as the PPP lost the 2013 elections.
Neither Shaukat Tarin, the incumbent finance minister, nor Asad Umar, Minister for Planning, Development, Reforms and Special Initiatives, has the reputation of data manipulation; however, it is fair to say that they may not question obvious data manipulation and/or a favourable analysis especially if it eases growing political pressure.
But that does not imply that there is no manipulation today as the gap between the released data and the ground realities appears to be widening. An example of this widening gap was the press release issued subsequent to the 104th National Accounts Committee (NAC) meeting, dated the second week of February 2022, not chaired nor attended by federal ministers as is the usual practice, with the growth rate upgraded to 5.37 percent from 3.97 percent after rebasing from 2005-06 prices to 2015-16 prices.
The press release raised red flags on three counts. First, the NAC, under the chairmanship of Secretary of the Ministry, was held in January as opposed to May as was the previous practice with the rationale that “this meeting has its own significance as it reviewed and approved the rebased series from 2015-16 to 2020-21 on the prices of 2015-16…the methodology adopted in the rebasing is in line with the 2008 System of National Accounts.”
The question as to the timing of rebasing on 2015-16 prices may be seen in the background of the International Monetary Fund’s (IMF’s) advice in the 26 August 2020 paper titled Benchmarking and Rebasing National Accounts: “countries should consider delaying the resource-intensive data collection activities until conditions warrant them recommencing” – conditions that because of “the COVID-19 pandemic has had a major impact on data collection activities and therefore the source data used by compilers may be of inferior quality.”
Second, the PBS carried out the rebasing exercise itself while previously these studies were conducted by private sector consultants raising questions about the integrity of the data which clearly benefitted the government’s narrative and therefore may need to be further scrutinized.
This is not to state that rebasing every ten years or so is not crucial, as correctly pointed out in the NAC press release, as there is a need to include new economic activities that become evident every ten years or so – activities that were identified as a result of 45 census/surveys/studies carried out from 2014-15 to 2016-17 but what is in question is the weightage given to each sector which would determine the final GDP calculation.
By and large, independent economists have challenged the methodology used in ascribing a particular size to each sector and highlighted the need to undertake an economic census before undertaking the national income rebasing exercise.
This assumes an intent on the part of the PBS that it is certainly going to claim was not present however given the manipulation of weightage of food in the calculation of CPI by Dr Hafeez Sheikh in 2010 one cannot simply dismiss its possibility in the NAC data merely because both Tarin and Umar may not have engaged in data manipulation in the past nor possess the relevant expertise to evaluate data integrity.
And finally, some statistics require clarification/explanation/rationalization. The discrepancy in total GDP for 2020-21 calculated with 2005-06 as the base and 2015-16 as the base in actual terms as per the NAC is 23,264 billion rupees — from 13,226 billion rupees to 36,490 billion rupees showing a growth of 5.37 percent.
The revised estimates of GDP in the budget documents for last year (2020-21) are higher at 47,709 billion rupees, which is acceptable as they pre-date the rebasing, but the State Bank of Pakistan gives this GDP for 2019-20 (and not 2020-21) while it updated the GDP figure for the current year to 55,488 billion rupees with the budget documents projecting a GDP of 53,867 billion rupees. There is clearly a need for rationalization.
In addition, the higher GDP in total terms with a projected growth rate of 3.9 percent as opposed to 5.37 percent needs to be rationalized and if the growth is higher than the claim of the government then the claim that tax to GDP ratio has improved also needs a revisit.
To conclude, the IMF’s sixth review has not taken the rebased data into account ostensibly as the NAC press release post-dated the finalization of the sixth review documents; however, it may be recalled that last year when the government announced a growth rate of 3.9 percent, well above the projected rate by IMF, the Fund staff carefully reviewed the data before confirming the higher growth rate – an exercise that took around two to three months. The confirmation (or not) of data after rebasing by the IMF is in all probability in process and one would have to wait to see whether it is accepted though domestically it appears to have been little impact on the general public struggling to make ends meet.
Copyright Business Recorder, 2022