Federal Defence Minister Pervez Khattak, appointed by the federal cabinet in its 7th February 2019 meeting as the chair of a committee with the term of reference to develop a system for the stabilisation of essential commodities as well as check profiteering, has reportedly expressed reservations on the credibility of Pakistan Bureau of Statistics (PBS) data. A defence minister is clearly not the most suitable candidate to head this committee as he has little if any contribution in taking policy decisions that impact on the general price level, unlike the Minister for Finance, and has no jurisdiction over civilian law enforcement agencies which routinely monitor prices of essential commodities.
Be that as it may, Khattak's reservations about the integrity of PBS data would surprise no one as the Bureau has a well documented insalubrious history of routinely engaging in data manipulation to show a favourable performance of the government in general and the finance minister in particular under whose administrative control it is used to operating irrespective of the fact that the Abbasi administration separated the Statistics Division from the Ministry of Finance. Disturbingly, PBS has not abandoned this highly objectionable practice which disables the government from taking appropriate policy decisions in a timely fashion; and recently claimed that prices of daily use commodities registered a 6.5 percent increase during the first six months of the tenure of the PML-N government while the comparable figure for PTI's first six months was only 1.4 percent. Repeated requests by Business Recorder to PBS to share the source of this data have been ignored raising serious doubts about the claim. The ruling party when in opposition was at pains to point out the data manipulation by the PBS, however, it has not yet focused on ensuring data integrity.
Price statistics are collected in three ways: (i) consumer price index, the most commonly used measure of inflation, covers 76 markets in 40 urban centres (with 1 to 13 markets selected depending on the population of the city) with 34.84 weightage given to food and non-alcoholic beverages (Dr Hafeez Sheikh reduced the food weightage by 6 percent and thereby reduced the rate of inflation), housing, water, electricity, gas and other fuels weightage at 29.41 percent (a not unreasonable weightage that would cover the poor) and 7.20 percent weightage to transport. In this context, the PTI government should revisit the weightage given to food as the low income groups in all probability spend around 40 to 45 percent on food items; (ii) the sensitive price index is counted on a weekly basis focusing on prices in 17 urban centres in a total of 53 markets with 13 in Karachi, 7 in Lahore and 6 in Rawalpindi and is computed for five income quintiles with computation of weightage the same as in CPI, however rent, medicines and health and education are not included which raise some doubts about heavier reliance on SPI relative to CPI; and (iii) wholesale price index is collected from wholesale markets in 21 cities covering a basket of 4,673 items with the largest weightage given to ores and minerals, electricity, gas and water at 31.1 percent followed by agricultural, forestry and fishery products at 25.7 percent and other transportable goods except metal, machinery and equipment at 22.37 percent followed by food, beverages, tobacco, textiles and leather at 12 percent.
To conclude, it is critical for any administration to look at all three data sources and at the same, understand the root causes of inflation which include: (i) markets in Pakistan typically operate under imperfect conditions due to cartelization even in those products that operate under perfect conditions in other countries, for example, sugar; (ii) massive smuggling across our porous borders that impact on prices; and (iii) impacting macroeconomic indicators are ignored particularly an unsustainable budget deficit, a depreciating rupee, and a current account deficit.