Macro-economic data released by the Ministry of Finance, particularly with reference to the fiscal deficit and total debt (external), as well as the integrity of the data released by the Pakistan Bureau of Statistics (PBS) under the administrative control of the Ministry of Planning, Development, Reforms and Special Initiatives, is increasingly being challenged.
The revised estimates for 2019-20 (contained in the budget documents 2020-21 prepared sometime in May – more than a month before the end of the fiscal year in June) and the release of the Summary of the consolidated federal and provincial operations for the year past (after a time lag of around between two to four months) inexplicably agree on two critical indicators – Gross Domestic Product (GDP) of 41,727 million rupees and negative 0.4 percent GDP growth. Other critical indicators are understandably divergent as the timing of the release of Summary for the year past allows the data gatherers to rationalize the numbers for the previous year – a task that appears not have been undertaken. Be that as it may, the Summary for 2019-20 indicates that the data is provisional, like in past summaries.
The divergence in the data with respect to expenditure is as follows: (i) current expenditure was cited at 8.5 trillion rupees in the Summary against 7.618 trillion rupees in the revised estimates in spite of the fact that (a) mark-up payments declined to 2.6 trillion rupees in the Summary against 2.9 trillion rupees in the revised estimates, a decline that may be attributed to the G20 debt relief initiative; (b) defence allocation declined slightly to 1.21 trillion rupees against 1.28 trillion rupees in the revised estimates; and (c) pensions declined slightly from the revised estimates of 470 billion rupees to 447 billion rupees in the Summary; (ii) federal development expenditure in the Summary was 467.7 billion rupees (not excluding development grants to provinces) with the revised estimates in the budget declaring federal development outlay at 701 billion rupees; thus as has been the norm in the past expenditure curtailment was in development as opposed to current expenditure notwithstanding claims that the expenditure allocation on the cabinet led by the Prime Minister and the Presidency has been slashed; and (iii) the rise in current expenditure in the Summary as opposed to the revised estimates is 900 billion rupees while the decline in development expenditure is only 234 billion rupees giving a net increase of 666 billion rupees in total expenditure.
Revenue (total federal board of revenue collections plus other taxes including petroleum levy was projected at 4.2 trillion rupees in the revised estimates while the Summary gives the total at 4.33 trillion rupees with petroleum levy contributing 30.6 billion rupees to the rise. Direct taxes declined from 2 trillion rupees envisaged in the revised estimates to 1.5 trillion rupees in the Summary and indirect taxes declined from 2.9 trillion rupees in the revised estimates to 2.4 trillion rupees in the Summary. Thus total tax collections declined by 630 billion rupees in the Summary as opposed to the revised estimates.
Non tax revenue rose from the revised estimates of 1.2 trillion rupees to 2.4 trillion rupees in the Summary – a rise that is almost entirely attributable to a rise in State Bank of Pakistan profits – from 620 billion rupees in the revised estimates to a whopping 935 billion rupees in the Summary or a rise of 315 billion rupees. In this context it is relevant to note that the government did not borrow from the central bank as per the standard normal IMF condition though the jury is out as to how much did the Ministry of Finance pressurize the SBP to engage in quasi-fiscal activities including: (i) sterilized foreign exchange intervention under the guise of disorderly market conditions, (ii) restructuring financial intermediaries, (iii) pressurizing commercial banks to lend to the government – a strategy that may partly explain the massive rise in the government’s domestic debt to 23.7 trillion rupees by September 2020 from the 16.5 trillion rupees it inherited, and (iv) issuance of debt securities as well as making swap arrangements to build up reserves.
Thus total rise in expenditure was 666 billion rupees, the decline in tax revenue was 630 billion rupees with a rise in non tax revenue (SBP profits rose by 315 billion rupees) and yet the government claims that the budget deficit that it had projected at 9.1 percent in the revised estimates was actually lower – 8.1 percent. This claim by the Ministry of Finance requires urgent clarification without which one maybe compelled to assume that the data is doctored to strengthen its position with the International Monetary Fund (IMF) in its ongoing negotiations on the second mandatory review while undermining the position of the hapless Pakistani public as it is forced to pay the cost
through a massive rise in electricity tariff (the third one so far this calendar year), a massive rise in petroleum levy collections (ongoing) and a budget deficit that is contributing to the rise in inflation.
PBS recent data is also a source of serious concern especially with respect to the one indicator that impacts directly on the common man notably the consumer price index (CPI). The claim that it has come down to 5.7 percent in January 2021 from the 7 percent in December 2020 remains suspect as the massive decline of 1.3 percent in one month at a time when price of electricity and petroleum products were raised a couple of times and the weekly sensitive price index showed a rise in prices every week except one when its decline was more than matched by a subsequent rise. Ignored is the significant tax component in electricity tariffs and petroleum and product prices while tariff adjustments with respect to the change in the rupee dollar parity and the international price may be unavoidable yet the rise in sales tax collections and/or petroleum levy is not. The weightage of these two items is not more than 6, a weightage that many statisticians believe understates their actual contribution to inflation especially at present as the government reliance on these sources of revenue has increased massively. However, such data leads the public to at best ignore and at worst dismiss or downgrade government data as doctored and not realistic.
To conclude, there is an urgent need for all ministries, particularly finance and Planning and Development under whose administrative control the PBS operates, to support realistic rationalized data that would enable them to take informed decisions. Failing that one would hope that the Ministry of Finance is at least aware of the actual data before taking key policy decisions rather than basing its policies on flawed data that no one lends any credence to.
Copyright Business Recorder, 2021