Fudging income and poverty numbers
THE budget-making period is often marked by allegations of the fudging of figures particularly about key economic indicators but, as it happens, not all of them are detected and challenged and are rarely rectified.
A former chief economist of the federal government talked of his struggle from 2002 to 2006, in an op-ed piece last week in this newspaper, to convince the authorities against manipulating data and how he could not succeed. As a result, final figures on poverty, GDP, unemployment, prices, etc., were improved upon although few believed in the achievements that were claimed.
Last month, one saw serious allegations of fudging of GDP growth and poverty figures. The ministry of finance was accused of having fabricated the figure of 2.37 per cent in an attempt to impress the IMF that this years GDP growth was almost close to what it had asked for the target of 2.5 per cent. Provisional GDP estimates for 2008-09 were worked out at Rs5,532.4 billion compared to the previous fiscal years Rs5,404.5 billion, resulting in an increase of 2.37 per cent.
However, a day later, on May 19, the finance ministry bosses felt compelled to revise the GDP figure downwards from 2.37 to 2.15 per cent. It was conceded that the figure of 2.37 per cent, worked out by the Federal Bureau of Statistics and endorsed by National Accounts Committee, was flawed.
Shaukat Tarin, the finance chief, also felt uneasy over the episode. He said he had asked the institution concerned to ensure transparency in figures and present the growth figures as they are. But he avoided touching the issues such as reducing the base by lowering the GDP growth of last fiscal from 5.78 per cent to 4.1 per cent and the change in methodology in measuring the growth in agriculture and construction sectors, and insisted that all the FBS steps other than excluding the large-scale manufacturing growth till March were justified.
The GDP growth target was originally set at 5.8 per cent. As the year proceeded, it was revised downwards to 3.4 per cent and then again to 2.5 per cent. Last week, Planning Commission Deputy Chairman Sardar Assef Ahmad Ali said that the GDP growth rate for this fiscal year would be two per cent. Then the finance ministry came out with the figure of 2.37 per cent. In fact, the National Accounts Committee risked its credibility when it approved without any hesitation the FBS statistics.
Where the FBS went wrong was its decision to exclude the negative growth figures of large-scale manufacturing (LSM) of -7.7 per cent registered during July-March period and to include only the LSM figures of July-February period that stood at -5.7 per cent.
Moreover, the FBS included doubtful figures of major crops in the growth estimates. The rice output in the current fiscal year was estimated at 6.96 million tons against the target of 5.7 million tons; wheat at 23.4 million tons against 24 million tons target, cotton 11.8 million bales against target of 14.1 million bales and sugarcane 50 million tons against the target 56.5 million tons.
The military regimes have been notorious for cooking up figures to cover up bad performance or exaggerating a positive achievement in a bid to earn legitimacy from the public for their illegal rule.
The caretaker government headed by Mohammadmian Soomro last year decided to set up a high-powered committee to ascertain the accuracy of the FBS data after it developed serious doubts about the quality of the figures about GDP growth, crops produce, inflation, poverty and industrial progress worked out by Shaukat Aziz regime.
The committee headed by Deputy Chairman Planning Commission Dr Akram Shiekh decided in its first meeting that industrial data would now be collected by the ministry of industries and not by the Federal Bureau of Statistics because the latters data did not match the ground realities. For instance, the FBS figures put food inflation at 14 per cent while, according to independent economists, it was over 20 per cent. Donor agencies also, time and again, in their reviews of Pakistans economy, had doubted figures of economic indicators.
The World Bank is also infamous for fudging data particularly about poverty and its health projects in the Third World countries. Last week, it ran into a serious dispute with Pakistans Planning Commission over how much poverty has reduced in the country. The bank claims that the number of those living below the poverty line has come down from 22.3 per cent to 17.2 per cent of the total population.
But nobody in the Planning Commission is willing to buy this figure and include it in the Economic Survey 2008-09 for it is obvious that this could not happen at a time when the countrys economy is under severe strain due to high inflation.
The World Bank insists it has used the correct methodology to calculate this figure worked out by the Planning Commissions subsidiary body called Centre for Poverty Reduction and Social Policy Development (CPRSPD). In stark contrast, PCs panel of economists had found poverty in the range of 37.5 per cent just a few months back.
The World Bank, according to a newspaper report, had concluded that poverty declined from 22.3 per cent in 2005-06 to 17.2 per cent this year on the basis of the data collected in 2007-08 under the Household Income Expenditure Survey.
According to the survey, poverty in the urban areas stood at 10.10 per cent and in the rural areas at 20.60 per cent. The poverty is often calculated on the basis of the CPI-based inflation statistics.
There is an impression that the bright performance of the economy and high GDP growth rates claimed by the Musharraf-Shaukat regime were mostly fudged and not based on ground realities.
In 2004, Dr Akmal Hussain, a noted economist, had disputed the then finance ministers claim that the percentage of population below the poverty line has declined by 4.2 percentage points as compared to the level in the year 2000. He claimed there was a fudge in the figure and argued that the composition of growth is contrary to the official claim of poverty reduction.
What had happened was that the agriculture sector where the majority of the poor subsist had shown a sharp decline in growth from 4.1 per cent previous year to 2.6 per cent. Even in the large-scale manufacturing sector with a growth rate of 17.1 per cent, the growth was predicated on a relatively small group of industries, namely consumer durables, automobiles, textiles and cement. These are hardly the industries whose growth could be expected to reduce poverty so quickly.
The World Bank had also been fudging figures of poverty in India. In 2004, Indian Planning Commission member N.K. Singh had accused the World Bank of inflating poverty figures to maintain its own relevance. If the World Bank starts giving real figures, it will lose its raison detre. The actual level of poverty, he said, was much lower than what was being projected by the World Bank.
The bank has also been accused of tampering with figures relating to malaria project and its success in India. Writing in the prestigious medical Journal Lancet in 2006, a group of experts charged the bank for falsifying financial and statistical accounts and also medical malpractices in Malaria treatment, mostly in India and Brazil. About the Malaria Booster Programme launched in April 2005 in India, the experts said that the bank reneged on funding and created a smokescreen of misleading figures.
