Ironically, the key macroeconomic data projected for FY14 in SBP’s annual report varies considerably from the one presented in the revised Letter of Intent (LoI) with the IMF. How could it happen when SBP’s Governor is a signatory of the LoI as well! And with government’s targeted data moving in third direction it’s become hard for business analysts and economists to pick the appropriate numbers for their own projections and simulations.
More importantly, it raises questions on the reliability of the central bank’s data. SBP’s projection for real GDP growth is 3-4 percent while government’s target at 4.4 percent is too optimistic and IMF’s revised upward target is still too low at 2.8 percent. Mind you, the forecasts are released after government’s announcement of 5 percent growth in the economy during the first quarter.
Similar is the tale for inflations forecasts, which with decent accuracy can be computed by a fresh analyst. With the six months data out, IMF’s inflation projection is 7.9 percent which is in line with government’s target. However, with half year CPI at 8.9 percent, SBP’s downward revised inflation forecast is 10-11 percent-–something which is a realistic estimate.
The comedy of errors doesn’t end here: these discrepancies are visible on fiscal deficit front as well. The government’s target is 6.3 percent and SBP expects it to be between 6-7 percent. On the other hand, the Finance Minister and SBP Governor agreed to the IMF to keep at 5.5 percent, which is an elusive target. The story on exports, imports, current account data and FBR’s revenues is not different and list goes on.
The negligence or lack of coordination can hammer the confidence of investors and jolt the market participants at any juncture. A classic case in hand is poor negotiation upon deciding the quarterly targets of Net International Reserves (NIR). The NIR are defined as the dollar value of the difference between usable gross international reserves assets and reserve-related liabilities.
The numbers which were fed by central bank’s internal team were much different from what was agreed with the IMF in earlier negotiations. By virtue of that, SBP had to switch from its role of net seller to become net buyer in the currency market to meet the stringent end-September targets of NIR.
The sharp rupee depreciation during that time has created panic like situation. Mind you, any sharp movement in rupee-dollar parity can disastrously change market sentiments and exposes domestic market fragility to the global market. Similarly, the IMF’s language on monetary policy is seemingly different from SBP’s decision last week.
Such variations, errors and omissions are not good for an economy, which is in dire need of foreign investment. At the time when government is to raise capital from international market by floating euro bonds and securitizing home remittances, coherence in key economic data set across institutions is imperative.

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