Double-counting: GDP overestimated, may be slashed by 10%

Published: April 29, 2012
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Some goods and services were counted twice for last several years, sources say.

Some goods and services were counted twice for last several years, sources say.

ISLAMABAD: 

Pakistan’s economy was reported to stand at Rs21 trillion this year – except, it may not have been.

The size of the country’s economy will shrink by up to Rs2.5 trillion, or roughly 10%, after reports surfaced that the value of some goods and services were counted twice in calculation of the Gross Domestic Product (GDP) for the last several years.

The ‘correction’ has major implications, and places a question mark on authenticity of key economic indicators.

Major ‘correction’

The ‘double-counting’ surfaced after Pakistan Bureau of Statistics (PBS) rebased the economy, shifting the base year for calculations from fiscal 1999-00 to 2005-06.

The rebasing has reduced the size of the economy, earlier assessed to be Rs21 trillion, to less than Rs19 trillion, said an official of the finance ministry.

Last year’s GDP has also shrunk by up to Rs1.5 trillion, the official added.

While a top official of National Accounts called it a “mistake that has been corrected,” the error has sent the government’s economic managers back to the drawing board to rework all economic indicators not just for the next year, but for the last seven years at least.

The disclosure may also delay the announcement of next year’s budget as national accounts figures are used in the Economic Survey of Pakistan and the Annual Plan for the next fiscal.

The governing council of the PBS is meeting next week, chaired by the finance minister, to revisit the national accounts, according to Secretary Statistics Sohail Ahmad.

Impact of the error

How does this correction torpedo calculations for the current and projections for the next fiscal?

The budget deficit for the current fiscal, initially estimated to be around 6.5% of GDP, will soar to around 9% after the correction, said an official from the finance ministry.

Last year’s deficit, calculated to be 6.6%, will increase to about 7.2, the official said. The debt-to-GDP ratio for the current fiscal, estimated close to 60% of GDP, will rise to about 70% after the rebasing, he added.

Defending the ‘correction’

An official of National Accounts said the department “will not hide mistakes anymore just to appease the finance ministry.”

Some of the goods and services were counted twice, and that has been addressed, he said, citing the example of water supply which was listed under two separate heads.

“It is better to accept readjusted size with an implication of a couple of trillions instead of letting the GDP artificially increase for many more years,” he added.

Neither officials from the National Accounts, that works under the Statistics Division, nor the finance minister or secretary were available for comments, despite repeated attempt. Finance Minister Dr Hafeez Shaikh has already asked the Statistics Division to place its work for ‘review’ in front of the governing council of the PBS.

Possible ramifications

The error may invoke penalties from International Monetary Fund (IMF) since all key economic indicators – like the debt-to-GDP ratio, the budget deficit and economic growth – were reported on an inflated GDP size for at least ten years.

The country entered into three programmes with the IMF during that period. Though there is no official confirmation, Pakistan is also negotiating a fresh programme with the Fund.

Published in The Express Tribune, April 29th, 2012.

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Reader Comments (31)

  • Mirza
    Apr 29, 2012 - 8:54AM

    This is yet another feather in the cap of Gen Mush like his referendum. During Gen Mush’s years of dictatorial rule, not only the voter’s lists were bogus with wrong entries to get desirable results for his cronies and allied parties but the economic numbers were manufactured to show the “great progress”. He even managed to decrease the defense budget by shifting the military perks from defense to civilian budget. Yet I am sure the rightwing forces are going to blame the democratic govt for his fraudulent numbers. In fact it is during the democratic govt that these cooked up mistakes are coming to light and are hopefully corrected.

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  • Ak
    Apr 29, 2012 - 8:58AM

    This is indeed a serious issue. One that it erodes credibility of future numbers and more seriously the effect it will have on the budgetary numbers. It seems the economy has gone back by two years.

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  • Apr 29, 2012 - 9:01AM

    Ooo Comon! Who doesnt know this was all deliberately done to get loans approved from World Bank and the IMF. When these financial Institutions lend money, they see GDP figures as collateral. Plus what difference does it make it the GDP was 3.2% or 4%, its not real economy anyway. This growth is in the Financial Economy. Just the M2 alone is growing at 10%! Looks like IMF didnt buy the cool-aid but World Bank will cough up $550 Million. I guess that will buy State Bank of Pakistan another 15 days on its Balance of Payment reserves.

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  • hyder ali
    Apr 29, 2012 - 9:18AM

    No one is surprised with this news. According to many experts Pakistan’s GDP is slightly below 15 trillion.

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  • H.A. Khan
    Apr 29, 2012 - 10:09AM

    Fudge the figures. That is all the governments have been doing while common men suffer.

    World Bank, IMF why did you not pick up this fudge?

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  • Pragmatist
    Apr 29, 2012 - 11:21AM

    I was always amazed to read Pakistan’s GDP numbers. Despite having literally no FDI, no power, no money, the GDP was shown as increasing in pretty acceptable figures. Now it seems the numbers were all cooked up. I won’t be surprised if the economy had been going in reverse over the last 5 years.

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  • Ashoka
    Apr 29, 2012 - 11:51AM

    Fudging of figures and facts is now ingrained in the land of pure.

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  • shah
    Apr 29, 2012 - 12:55PM

    and in bhaRat, where 50% are starving

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  • Ameer
    Apr 29, 2012 - 1:06PM

    2/3rd of our economic activity is unreported or comes under domestic services etc. if u include it, our GDP clearly exceeds 21 trillion. This is the reason Pakistan didn’t collapse even after fighting US’s war on terrorism and other financial crunch in Pakistani economy.

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  • Roperia
    Apr 29, 2012 - 1:36PM

    This effectively puts Paki economy back by around three years considering a compounded annual growth rate of about 3%, witnessed in Pakistan in the last few years.

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  • Meekal Ahmed
    Apr 29, 2012 - 1:37PM

    This is an unwelcome controversy and could have been avoided altogether with a little more care.Recommend

  • Apr 29, 2012 - 1:45PM

    I will not believe these conspiracies against my fatherland unless my Zaid Hamid saab and Riaz Haq saab tell me…this news is all paid news to demoralize the youth of this infinitely rich land blessed by Allah himself…

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  • Ahmed
    Apr 29, 2012 - 2:43PM

    21-2.5=18.5 trillion rupees=182 billion$.

    Indin Gpd is 1.7 trillion $.

    our population is 18 crore and theirs is 121 crore.

    So ratio is same

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  • khalsa
    Apr 29, 2012 - 3:26PM

    @shah:
    international org also says that poverty in pakistan is 60%, you read those report or single out India bashing studies only

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  • jagjit sidhoo
    Apr 29, 2012 - 4:12PM

    @Ahmed: As per your figures it is Pakistan 10.11 billion for every 1 crore population , India it is 14.05 billion for every 1 crore population the ratio is 10/14 . However these are stats and we all know how wrong they can be, i am very sure that India is a poor country regarding Pakistan you would be a better judge as you live there. I strongly feel we must start bench marking ourselves against the rich countries so that we realize where we stand and how far we have to go . The night is very young for both of us and we have a very long way to go. Sometimes i ask myself have we started our journey ?

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  • Apr 29, 2012 - 8:00PM

    Tax collection under President Musharraf more than doubled with robust gdp growth and low inflation. As a result, Pakistan created more jobs than India and produced a vibrant middle class larger than India’s as percent of its population, according to World Bank and ADB figures. With growing middle class consumption in the undocumented economy, Pakistan’s real GDP is now estimated to be at least 30% or higher than the official figures, according to various published estimates.

    http://www.riazhaq.com/2011/09/pakistan-tops-south-asia-jobs-growth.html

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  • dev Maiti
    Apr 29, 2012 - 8:39PM

    IT is indeed funny that people talk about “undocumented” economy to try and artificially jack up the numbers. Pakistan as a state seems to be providing wrong economic numbers for many years now. So assertions such as “more than India” are stupid at best as they are based on data provided by the same “pakistani experts” who cooked up the GDP numbers. Pakistan is NOT the only country with “undocumented” economy. There is a reason it is not part of the official figures. Pakistan needs to come out of its “India” obsession and get its house in order.

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  • Yash
    Apr 29, 2012 - 8:54PM

    talking of undocumented economies….indian gdp shud be equivalent to china’s or even usa’s gdp….

    pakistan is not the only country to have undocumented economy….and because its UNDOCUMENTED….nothing can be said about it

    so please dont fall back on that…coz i remember pakistanis need PROOF for everything…be it terrorism, corruption or wateva

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  • ayesha_khan
    Apr 29, 2012 - 9:21PM

    @H.A. Khan: “World Bank, IMF why did you not pick up this fudge?”

    he World Bank and IMF do not have raw numbers. So it would not be posible for the to detect such fudge. But in some other areas IMF did indicate that the Ministry of Finance numbers were very optimistic.

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  • ayesha_khan
    Apr 29, 2012 - 9:27PM

    @Riaz Haq: “Tax collection under President Musharraf more than doubled with robust gdp growth and low inflation. As a result, Pakistan created more jobs than India”.

    Inflation had reached 0ver 20% in 2008. Fore numbers had shrunk leading to a need to IMF intervention. As for job creation, Musharraf changed the definition of a ‘job’ to include jobs where there was no salary paid. This gave a onetime artifical boost to job creation under Musharraf by counting many hitherto uncounted existing jobs into the national accounts.

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  • gp65
    Apr 29, 2012 - 9:43PM

    @Riaz Haq:
    It apepars that thedouble counting started during Musharraf’s time and since World Bank and IMF only have access to derived numbers instead of raw numbers they were unable to detect the fudging. If the GDP numbers were inflated under Musharraf, why should we believe that the other economic metrics published by him were accurate? There have been plenty of articles by senior retired Pakistani economic experts who have questioned several different economic metrics under Musharraf.

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  • Syed
    Apr 29, 2012 - 11:16PM

    When will people like Riaz Haq above stop boasting about Musharraf regime? All economic growth during Musharraf period came after massive amount of Pakistan’s loans were written off and huge amount of aid packages were announced for Pakistan after US declared War On Terror. So Pakistan’s fiscal health improved immediately, inflation came down immediately, business sentiment improved, tax collection improved. Musharraf didn’t do any miracle.

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  • Naresh
    Apr 30, 2012 - 12:06AM

    @Ahmed:
    21-2.5=18.5 trillion rupees=182 billion$.
    Indian Gpd is 1.7 trillion $.
    our population is 18 crore and theirs is 121 crore
    So ratio is same
    1. Pakistan’s Population is about 200 Million so India’s Population is about SIX TIMES that of Pakistan.
    2. India’s GDP is 2,700/182 = NINE TIMES that of Pakistan.
    Kapish?
    CheersRecommend

  • MUHAMMAD IQBAL
    Apr 30, 2012 - 3:32AM

    MR SALMAN SHAH EX FINANCE MINISTER OF PAKISTAN CAN INFORM CORRECTLY ABOUT THE SAID NEWS SO PLS REQUEST HIM TO EXPLAIN AS THE PEOPLE KNOW ECONOMICS TRUST HIM MUHAMMAD IQBAL KARACHI

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  • Apr 30, 2012 - 4:24AM

    @ayesha_khan: Wrong! Inflation from most of 2000-2007 was well under 10%. It never reached 20%. The highest was just over 16% in 2008 and that too because of the problems created by the political class starting in 2007. Musharraf rule was effectively over when Shaukat Aziz quit and a caretaker admin took over.

    http://www.sbp.org.pk/publications/Inflation_Monitor/2008/Feb/IM-Feb-08.pdf

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  • jagjit sidhoo
    Apr 30, 2012 - 7:00AM

    @ayesha_khan:”Musharraf changed the definition of a ‘job’ to include jobs where there was no salary paid.” That was original thought from Musharraf

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  • Fahad Hasan
    Apr 30, 2012 - 4:34PM

    This is simply inefficiency of National Accounts staff of PBS. Most of people are here for many years. They do not let any body to enter into their domain. They manouver figures at will. Double counting excuse is simply ridiculous as same people are doing this exercise for many years. If something is happened wrong, they all should be fired and independent inquiry should be conducted and culprits should be punished. They have simply created a credibility gap and defaced the country’s image. They are more criminal than anybody else.

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  • Rationalist
    May 1, 2012 - 12:06AM

    Musharaf and his assistant Shaukat Aziz artificially inflated the GDP for many years. The GDP was around $70B in 2000 but miraculously rose to $200B in ten years! This is possible only if the real inflation and exchange rate adjusted GDP growth rate was over 12% a year!!

    Musharaf did his smoke and mirror magic to fool the IMF and other global financial bodies.

    So, the true GDP of Pakistan is around $120B after allowing a generous average growth rate of 5%.

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  • jagjit sidhoo
    May 1, 2012 - 6:48AM

    @Fahad Hasan:Well said brother the intellectually dishonest normally get away.

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  • siddiqui
    May 4, 2012 - 10:05AM

    Mr. Mirza finance minister is not a common person to remain unaware for many years. The monitoring of national accounts comes under the responsibility of finance minister. Instead of criticizing successive government, we should ask the current finance minister why he has been lacked in his performance to identify this blunder. Why this matter has been elicited now, when the new budget is nearer to present.
    If we be realistic, don`t this matter sounds/looks to draw back low performance/negligence of current finance minister to successive government in eyes of public.

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  • Devendra V. Katuke
    May 15, 2012 - 1:32PM

    In 2011, India’s GDP was $1.843 Trillion and population 1.21 Billion. 1843/1.21 = 1523
    In 2011, Pakistan’s GDP was $210 Billion (forget about double checks and lies sories) and population 187 Million. 210/0.187=1123

    Difference is even more in 2012.(When Pakistan’s recalculated GDP in 2012 is coming out to be $182 and India’s GDP is said to be crossing $2 Trillion.)

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