Playing with numbers: Projecting a rosy picture

Govt showing improved economic performance by fudging key indicators.

ISLAMABAD:

The mandarins of Pakistan Muslim League-N government are still applying failed tactics of the 20th century, showing an improved economic performance by fudging key indicators.

Perhaps, they are oblivious of the fact that this is a much more informed public — especially compared to that of the previous century. Stakeholders now keep an eye on every development.

In the process, the government is foregoing time it could use to implement real change in economic conditions. Economic pundits are not realizing that such tactics do not help solve deep-rooted problems. Besides, serious questions are now being raised over the government’s credibility.

In the last couple of weeks, three glaring cases have surfaced where the government tried to manipulate statistics as it looked to show a performance far from reality. This time it tried to play smart by manipulating figures of real economic growth, budget deficit and withdrawal of tax exemptions.

The efforts that the government is putting in to doctor these numbers has made one thing clear — the authorities are more interested in claiming early victories than addressing real challenges facing the economy.

The government made the first attempt when it declared that economy grew 4.1% in fiscal year 2013-14 – for the first time in six years. The claim surprised many as both independent economists and international financial institutions were projecting a growth rate in the range of 3.3% to 3.8%.

The Institute for Policy Reforms – an independent think tank headed by former finance minister Dr Hafiz Pasha who is still very close to the PML-N leadership – disclosed that the 4.1% growth was an inflated one.

The IPR reports stated that the claim of growth rate exceeding 4% after a gap of six years is factually incorrect. It estimated that the GDP growth rate in 2013-14 is close to 3.5% — the lowest in four years.

The casualty in this case was the credibility of Pakistan Bureau of Statistics – the so-called independent body whose governing council’s chairman is Finance Minister Ishaq Dar.

The government’s second attempt was even more glaring this time as it tried to fudge the budget deficit figures. One could find in the budget books that the overall budget deficit has been understated by Rs282 billion or 0.9% of the GDP.

According to budget documents, the actual gap between national income and expenses stands at around Rs1.7 trillion. In his budget speech at the National Assembly, Finance Minister Ishaq Dar said the overall budget deficit would be 4.9% of GDP or Rs1.424 trillion for the new fiscal year 2014-15, commencing from next month.

The federal government has excluded the implications of other development expenditures worth Rs162 billion and net lending of Rs120 billion while calculating the overall budget deficit, showed the calculations made on the basis of the Budget-in-Brief document. Dar’s ministry came to 4.9% fiscal deficit figure after assuming that total revenues will be 14.5% of GDP or Rs4.2 trillion against the total expenditure of 19.4% of GDP or Rs5.64

It is probably the luck of Finance Minister Ishaq Dar that the International Monetary Fund is not professionally doing its job this time, unlike the past when it used to take exceptions on such things. The economists argue that the IMF programme was more self-serving, as the lender of the last resort was more interested in recovering its past loans.

The government’s third attempt is in the taxation area.  It carried out an exercise and worked out that the cost of tax exemptions extended to affluent people of the society was Rs477 billion. In its first phase, it announced to withdraw Rs103 billion tax exemptions from July this year. However, the figures seem inflated as the budget documents pitch a number that is far below Rs103 billion.

It wanted to withdraw many of these exemptions but could not take them back after it came under pressure from the very group. In order to hide its failure, the government is now projecting an inflated figure of tax exemptions as well, summing up the lengths to which it has gone to project a rosy picture.

Published in The Express Tribune, June 16^th, 2014.

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