Lack of data integrity

There is an increasing number of instances where the integrity of data is obviously not being maintained. There are limited numbers of data sources in the country notably the State Bank of Pakistan and the Ministry of Finance and its allied divisions. Disturbingly the figures cited by the allied divisions of the Ministry of Finance including data presented in the Budget Strategy Paper 2012-15, the Poverty Reduction Strategy Paper II and the budget documents do not tally. Examples abound.
The fiscal deficit as a percentage of Gross Domestic Product (GDP) is cited as negative 4 percent in the original budget documents of 2010-11 with revised estimates of negative 5.7 percent revealed on June 6, 2011 in the 2011-12 budget documents. Given the fact that the Federal Board of Revenue (FBR) was compelled to admit that it presented gross as opposed to net revenue calculations for 2010-11, the actual budget deficit for 2010-11 revealed in the first quarter of the current year was the more realistic 6.6 percent as per the State Bank of Pakistan (SBP).
The government can legitimately argue that the difference in deficit calculations is attributable to the fact that the budget documents for 2011-12 can only project revenue and expenditure items for the remaining fiscal year ie till 30th June; yet given that data manipulation invariably leads to presentation of a better (as opposed to poorer) performance than was in reality the case, the government leaves itself open to charges of deliberate manipulation of statistics.
The Budget Strategy Paper II notes that the deficit in the 2011-12 budget documents would be achieved, ie 4 percent of GDP. This is unlikely with the SBP in its report dated December 2011 projecting "a fiscal deficit of 5.5 to 6.5 percent of GDP, with a bias on the upside." The report suggests that "policymakers may consider formulating a comprehensive medium-term fiscal reform master plan that is staggered and sequenced on the basis of the hard lessons of the recent past." Unfortunately the policymakers, by refusing to acknowledge real data, undermine the need for formulating and implementing the necessary reforms.
Additionally statistics are being presented in a manner designed to befuddle independent analysts. Thus the Finance Ministry and its allied divisions have recently focused on the doubling of total revenue collections during the last four years, a claim that was also made in President Zardari's address to the joint sitting of parliament on March 17 this year, rather than focusing on the more relevant barometer of the efficacy and efficiency of a tax system namely the tax-to-GDP ratio, which declined from around 10 percent in 2007-08 to 8.5 percent this year.
The fact that our taxes have doubled while the tax-to-GDP ratio has tumbled reflects a trend that needs urgent correction as it reflects higher collections under sales tax levied in percentage terms (on oil and products as well as other commodities of general use) with a rise in their price due to international dynamics or implementation of local inflationary policies, for example, the rise in central government debt.
There have been frequent demands in the past to delink the Federal Bureau of Statistics from the Ministry of Finance and to make it a truly independent body that has the capacity to present realistic figures on which appropriate policies can be formulated. Unless the policymakers have access to correct data they would be unable to formulate policies that are focused on improving macroeconomic indicators. It is, therefore, pertinent for the country's economic managers to focus not on short-term political gains by manipulating statistics in a shoddy manner, easily discernible because of failure to crosscheck data between divisions; but instead on developing a system where realistic data can be used to implement policies that would be in the long-term financial interest of the country as well as the long-term political interests of the party in power.