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Macroeconomic statistics released by Dr Hafiz Pasha-led Social Policy and Development Centre (SPDC) sourcing its computations on the Economic Survey 2015-16, the latest available data from the Ministry of Finance (Pakistan Fiscal Operations) and the State Bank of Pakistan (SBP) indicate a significant divergence from those maintained by the affiliate departments of the Ministry of Finance and announced by the Federal Finance Minister Ishaq Dar in his budget speech.

There is an obvious disconnect between the data released by the Pakistan Bureau of Statistics (PBS), under the administrative control of the Ministry of Finance, and the calculations by the SPDC. The reason: PBS's failure to rationalize component data. According to the SPDC, the growth rate of the economy is around 3.1 percent and not the 4.7 percent as claimed by the government and the reason is overstated growth of 10 out of 18 sectors with 60 percent overstatement in the services sector alone that official estimates indicate grew by 5.7 percent. SPDC's rationale is provided by a data analysis over four decades premised on the sector's 21 percent contribution to the GDP directly, indirectly through 60 percent of the manufacturing sector being agro-based and 40 percent of trading and transport of farm products: whenever growth in farm output has been negative the economy's growth rate has never exceeded 4 percent. In 2015-16 agriculture growth was computed at a negative 2 percent and additionally the 2 percent growth of electricity is unlikely to support a GDP growth of 4.7 percent, SPDC maintains.

There is a lack of synchronicity of some data between the Finance Ministry/its affiliate departments and the SBP. The July-March domestic debt figure as reported by the Ministry of Finance is 1007 billion rupees while the SBP gave the total of 1209 billion rupees which accounts for SPDC's conclusion that the budget deficit for the ongoing fiscal year is understated by 200 billion rupees. And more disturbingly there is a lack of synchronicity within government data as SPDC points out: the claim that poverty fell from 44 percent in 2007-08 to 29.5 percent in 2013-14 is not supported by indicators that affect poverty incidence, including deteriorating housing conditions, rise in rents and the decline in per capita consumption of some basic food items.

In instances where manoeuvrability of macroeconomic indicators is not possible, for example, exports and imports data compiled by the SBP as and when transactions occur the justification presented by the government for poor performance is flawed. Dar maintained in his budget speech that "Pakistan's export potential has not been fully realised due to depressed commodity prices and a slowdown in major export items". SPDC maintains that the quantity aspect played a greater role than low international prices, which, it was argued, indicates poor domestic enabling environment rather than external factors. One major impediment to exports is the policy to keep the rupee strong which acts as a disincentive to our foreign buyers.

Pakistan People's Party as well as the Pakistan Business Council have taken note of SPDC data and have expressed their extreme concern at the range and extent of data manipulation. Business Recorder has been challenging the data released by the Finance Ministry for the past three years and has tirelessly campaigned for the need to delink statistical gathering machinery from the administrative control of the Ministry of Finance with the objective of enabling the Ministry to take informed mitigating policy decisions in time. But to no avail.

It is unfortunate that a similar disregard for accuracy pervades the budget documents. On the expenditure side of the budget, it is a challenge to find where an item is parked. For example, the direct cash subsidy of 40 billion rupees to the farm sector and the subsidy for urea and DAP, estimated at 46 billion rupees with the federal government share of 23 billion rupees announced by the finance minister on the floor of the House is nowhere to be found.

On the non-tax revenue side, the government has placed 75 billion rupees from the auction for PTA's 3G licence for 2016-17 while the relevant ministry is baffled as to the amount especially given that Dar compelled the ministry to auction single frequency spectrum by 20th June this year to meet his revised 2015-16 target of 45 billion rupees. Gas Infrastructure Development Cess was cited as non-tax revenue till 2014-15 whence it began to be placed under other taxes. Direct taxes comprising of around 75 percent revenue from withholding taxes are in the sales tax mode (on products/services rather than on sources of income) and should have been placed under indirect taxes. In addition, withholding agents are responsible for collections under this head and not FBR though the amount is credited as FBR taxes. The budget document in the PSDP allocations gives a figure of rupees 100 million for Gwadar airport, whereas the Chinese ambassador is reported to have categorically stated "no money of Pakistan is being spent on the construction of the [Gwadar] airport.

One would have assumed that the objective of the budget document is to facilitate rather than to confuse the reader. But then again one would have assumed that the Ministry of Finance would enable itself rather than disable itself from taking informed decisions based on accurate data.

Copyright Business Recorder, 2016


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