EDITORIAL: The Advisor to the Prime Minister on Finance, Dr Hafeez Sheikh, while chairing the Monetary and Fiscal Policies Coordination Board (MFPCB) meeting last week expressed his serious reservations on the integrity of data compiled by the Pakistan Bureau of Statistics (PBS), particularly those indicators with obvious political repercussions notably inflation and unemployment, and emphasized the need to disaggregate inflation data. These remarks are extremely disturbing given that Dr Sheikh's comments come in the wake of more and less identical concern voiced by the Advisor to the Prime Minister on Commerce Razzak Dawood on Tuesday last during a parliamentary standing committee meeting when he reportedly expressed his doubt over the prices of commodities collated by PBS in response to a query by Senator Kabeer Shahi that prices of onion and tomato were low in Balochistan due to import from the neighbouring countries.
PBS was under the Ministry of Finance until about two years ago and is at present under the administrative control of the Ministry of Planning, Development and Special initiatives headed by Asad Umer whose views on PBS performance have not yet been made public though the consensus is that he has not attempted to manipulate data to reflect a more favourable performance than is in fact the case as in the past. This lack of focus on PBS could well be sourced to Umer's multiple responsibilities including: (i) head of National Command and Control Centre dealing with Covid-19, (ii) chairman of the cabinet committee on energy, (iii) chairman of cabinet committee on China Pakistan Economic Corridor, and (iv) focal person for supervision and coordination amongst government agencies for all mega projects in Karachi funded by the federal government.
Be that as it may, Umer can no doubt mount a credible defense by stating that by not exerting any pressure or influence he is ensuring that, unlike in the past, there is no political interference in data; however as the relevant minister it is his responsibility to ensure that PBS has adequate capacity and releases accurate data.
Dr Sheikh's suggestion to disaggregate inflation data during the MFPCB meeting ignores the fact that PBS provides weightage of each item in its calculation of the consumer price index (comprising of monthly price changes of 356 items in urban and rural areas), the sensitive price index (includes weekly price changes of 51 essential items) and core inflation (energy and food prices not included). Dr Reza Baqir, during the MFPCB, hastened to add that inflation was not demand pull, as the high discount rate during much of last fiscal year (till March 2020 when the onslaught of the pandemic began) contracted aggregate demand to such an extent that manufacturing output contracted, leading to significant unemployment. However, cost push inflation due to the agreement by the country's economic leaders with the International Monetary Fund to raise utility prices with the goal of achieving full cost recovery accounted for the Fund projecting an inflation rate of 13 percent for 2019-20. And in response to the projected rise in inflation the budget for last fiscal year raised salaries of public sector employees as well as the minimum wage leading to wage push inflation. This year, the government has not raised public sector salaries however the impact of cost push inflation is likely to continue.
When cabinet members express their lack of confidence in PBS data collation it not only raises serious questions about the capacity of the PBS but more alarmingly it raises questions about the capacity of the economic team to deal with a crisis that may not be adequately reflected in the available data that does (it is supposed to) guide their decision making. One would hope that planning ministry turns its attention to this critical area of its responsibility.
Copyright Business Recorder, 2020
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