0.3% economic growth rate debunked

PBS buckles under govt pressure to fudge data


Shahbaz Rana May 26, 2023
$33.9 billion contraction was witnessed in the economic size. PHOTO: File.

ISLAMABAD:

The size of Pakistan’s economy has shrunk to $341.5 billion and its per capita income has slipped to just $1,568 in the outgoing fiscal year due to almost flat economic growth and currency devaluation. Against this backdrop, a dispute has arisen about the official GDP growth figure.

The economy shrank by $34 billion or 9% whereas per capita income also decreased by $198 or 11.2%, according to the provisional estimates that the National Accounts Committee (NAC) approved a day earlier.

But according to some government sources and fresh details, the management of the Pakistan Bureau of Statistics (PBS) faced immense pressure to change the economic growth rate which was initially estimated at a negative 0.5% for the outgoing fiscal year, ending on June 30.

The sources said that the PBS management succumbed to the pressure and agreed to show a nominally positive growth rate of 0.3%. Subsequently NAC stamped the figure.

In the Post-Disaster Needs Assessment (PDNA) report on the 2022 floods, the government had told the world that “around one million livestock are estimated to have perished”.

But the PBS counted that only around 200,000 animals had perished during the last summer floods, calling into question the credibility of both the government and the PBS.

The NAC approved that the livestock grew 3.8%, a number that surprised many as the rate of growth was even higher than 2.3% during the pre-flood period. The glaring contradiction has also put a question mark over the credibility of the official economic growth rate of 0.29%, which the NAC approved on Wednesday.

The change from a negative to a positive growth rate was apparently made in haste and the PBS -- the country’s national data collecting agency -- for the first time could not even present a proper “working paper” for the approval of the NAC, said the sources.

The NAC approved the provisional economic growth rate on the basis of mere one presentation and that, too, without having the working paper on the table.

Despite this, the size of the economy and the per capita income shrank in dollar terms during the outgoing fiscal year. The economy’s size slipped to $341.5 billion, 9% or $33.9 billion less than last year.

In rupee terms, the size of the economy reached nearly Rs85 trillion in 2022-23 -- about Rs18 trillion higher than the last fiscal year -- thanks to a record inflation rate in the country.

Similarly, the per capita income that had been estimated at $1,766 in the last fiscal year slipped to $1,568 -- a reduction of $198 or 11.2% per person. In rupee terms, per capita income jumped from Rs313,337 in 2021-22 to Rs388,755 in 2022-23 -- one-fourth increase on back of inflation.

The PBS chief statistician, Dr Naeem ul Haq, denied that there was any pressure on him to manipulate the figures. He did not reply to a question if it was true that the PBS had printed working papers for NAC with negative 0.5% GDP growth for FY2022-23 but the paper was not shared with the committee.

The chief statistician also did not respond to a question about the factors that led to changing negative 0.5% growth to positive 0.3% growth rate.

Dr Naeem also did not respond to the question as to why the PBS did not present the working paper in the NAC meeting. He was also requested to comment whether he was threatened by the government to change the number or face the consequences. Dr Naeem said: “It was not correct”.

However, the sources in the PBS and the Ministry of Planning said there was extreme pressure on the PBS management to change the figures.

When contacted, a senior government official refuted that the Ministry of Finance pressured the PBS. He instead said the chief statistician should take the responsibility of the whole exercise.

Another government functionary who is also accused of pressuring the PBS said the Ministry of Finance only provided data to the PBS and it did not interfere in its working.

According to the PDNA report, agriculture, food, livestock, and fisheries sectors sustained losses of $3.7 billion.  It added because of these losses, the local food processing and slaughtering industries will be negatively impacted by the expected reduction in food harvests and reduced supply of livestock.

As a result, industry sector value added is expected to shrink by 0.7% of FY22 GDP, according to the report. But NAC on Wednesday approved that the fishery sector grew by 1.44% compared to only 0.4% growth in the previous year when the floods had not damaged this sector.

Despite slump in the industrial sector, over 6% growth has been shown in the electricity, gas and water supply sectors. The contraction in the construction sector is shown at 5.5%, which the sources said is less than what the PBS had initially estimated.

The government has reported that the education sector grew at 10.4%, which was the highest ever as the previous highest was 3.5% in 2017-18.

Likewise, health services are claimed to have grown by 8.5% which is even higher than the 6.2% growth rate during Covid-19 when funds were diverted towards this sector. The growth in the other services is shown higher than last year which is anomalous as most of it has a fixed growth rate of base year.

Overall, the agriculture sector has been estimated to grow at 1.6% despite the fact that cotton production decreased by 41.1%, cotton ginning reduced by 23%, sugarcane grew only by 2.8% and rice output decreased by 21.5%.

Industrial sector contraction is shown at 2.94%, which the sources said is less than the initially estimated negative output. The imports, important crops and manufacturing sectors significantly contracted but the government has shown only 4.5% negative growth in the wholesale and retail sectors.

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