Finance Ministry clarifies
ISLAMABAD; Khalid Sarwar, Director General (Media), Ministry of Finance, Govt of Pakistan, has issued the following clarification about Khalid Mustafa’s story appearing in The News on May 19.
“This is with reference to Khalid Mustafa’s report “NAC approves manipulated GDP growth of 4.1%” in the 19th May issue of your esteemed daily. This Statistics Division would like to clarify that the Reporter’s claim that “NAC approves manipulated GDP growth of 4.1%” is not based on facts. As a matter of fact the estimates of GDP and GFCF are compiled by professionals in line with the methodology and practices recommended by the UN System of National Accounts (SNA) and adopted by the entire world. The National Accounts Wing of FBS is one of the foremost users of all the information and numbers produced in the country by all private, public and government organizations. Major stakeholders are part of the National Accounts Committee (NAC) and they have to defend the numbers provided by them for incorporation in the estimates and preparation of macro-economic indicators. The FBS and National Accounts professional are aware of data limitations and they try their level best to ensure and sustain the consistency of all data and information to develop the macro-economic aggregates. Therefore, concentrated efforts are made by these officials to ensure maximum level of reliability, authenticity, impartiality and quality of data.
It may be noted that while discussing GDP and GFCF numbers, the major bottleneck is that most of the readers are less familiar with the system, methods and concepts of National Accounts recommended in the UN System of National Accounts. For example, GFCF and investment have conceptual, methodological and coverage difference. The other one is that internationally, the pre-budget exercises are based on 6 to 9 months actual and projected data for the remaining months based on provisional, budgeted information and or trend of last year’s. It is further clarified that in the pre-budget meeting of National Accounts Committee, estimates for three years are presented; current year estimates are based on provisional and based on partial information/data, last year’s estimates are revised on the basis of up-to-date and full year’s information, but year before last estimates are finalized by incorporating all those information that have time lag of more than one year.
The low or high investment doesn’t affect the same year’s GDP; its impact comes through its cycle. Higher inflation can be observed in current GDP estimates, whereas, fiscal deficit, armed conflicts, corruption, absence of rule of law and wars never affects GDP if they do not directly impede or obstruct the economic activities. The NAC is high power Committee consisting of members from all federal and provincial economic ministries, public sector enterprises, experts from research and academic institutions, chamber of commerce and industry, etc. The NAC meetings are also attended by experts from international organizations those providing technical assistance to FBS and its National Accounts Wing. All of these participants debate into the details of the figures, produced before them and approve each number after thorough discussion.
In the referred NAC meeting the growth performance of construction and other economic sectors was also debated in detail and it was explained to the meeting that due to very low base of last year, the growth seems very high but in terms of value it stands to the tune of year before last.
The provisional estimates for the ongoing current year are based on the budgeted figures of Federal, Provincial and District governments. It is worth mentioning that slashing of the public sector development programmes during the current year will be reflected in the revised budget which is presented with the next year’s budget.
The growths of economic indicators have been compared with the targets. Targets are always fixed in the prevailing situation and economic performance, whereas, the indicators of National Accounts are prepared and compiled on current year’s actual output and showing the behavior of economy, which can be completely different in some situations which can’t be truly forecasted a year before. In Pakistan’s current economic scenario it was expected by most of the economists and statisticians that some targets will not be achieved and in some progress will be higher. I would appreciate if this clarification is published prominently in tomorrow’s issue of your esteemed daily.
Khalid Mustafa adds: In the EAC meeting on May 22 Adviser to PM on Finance and Revenue Dr Hafeez A Sheikh disclosed that IMF and World Bank have also expressed their concern over the ‘tricky methodology to increase the GDR growth of 4.1 per cent for outgoing fiscal.
He is also reported to be perturbed over the 4.1 per cent GDP growth for current fiscal 2009-10 which has been shown at higher side by FBS by reducing the reference growth base of the last financial year from 2008-09 to 1.1 per cent from 2 per cent. He is finding himself in a difficult position before the international financial institutions (IFIs) about explaining and defending the so-called 4.1 per cent GDP growth.”
“Because of this very reason, he constituted the committee headed by Dr Nadeemul Haq to revisit the GDP growth of 4.1 per cent worked out by FBS.” The committee has Dr Ashfaq Hasan Khan, Dr Rashid Amjad, Saqib Shirani and Dr Ijaz Nabi as members.
These days, we have Parliamentary Committees, an enlightened media, economic experts like members of EAC, and the international donors who not only keep scrutinizing government’s economic policies but also openly discuss various aspects of the national budget. The EAC discussed a number of issues concerning the national economy, including proposals for the new budget, VAT and other taxation issues, public sector expenditure, expenses on the war on terror and documenting the national economy and so many other issues. In the second last paragraph of the said press release, the government has acknowledged that there is something wrong in the bottom which is why Dr Sheikh constituted the committee to evaluate the national accounts and GDP growth data. This correspondent stands by his story.
