EDITORIAL: The National Accounts Committee (NAC) data released in a press release on 20 January 2022, cited by the Prime Minister during his telephonic interaction with the general public on 23 January, upgraded the growth rate for 2020-21 from 3.94 percent announced in May 2021 to 5.37 percent (2005-06 base) and 5.57 percent (with rebasing to 2015-16, reviewed by the World Bank, to capture new economic activities) — a difference of around 0.2 percent. However, as per the NAC, in total terms, the GDP rose from 13.2 trillion rupees to 36.4 trillion rupees. There is therefore an urgent need to rationalise this upgraded amount with the budget document 2021-22 claiming GDP at market prices at 47.7 trillion rupees with a real GDP growth of 3.9 percent for last fiscal year.
Five further observations are critical. First, while the upgraded growth rate is being cited as an achievement; yet, ignored are a set of critical macroeconomic indicators that are calculated as a percentage of GDP that, one would be forced to assume, would have performed more poorly than cited in the budget — indicators that include (i) tax as a percentage of GDP would be lower than 8 percent (instead of the 9.8 percent claimed in the budget), and non-tax revenue of 3.6 percent. The federal government expenditure as a percentage of GDP would be lower of course as would the fiscal balance (negative 7.1 percent) and primary balance (negative 1.2 percent) as would public debt as a percentage of GDP which was budgeted for last year at 83.1 percent. In other words, a range of recalculations are required.
Secondly, the press release notes that “usually the NAC meeting is held in May every year, however, this meeting has its own significance as it reviewed and approved the rebased series from 2015-16 to 2020-21 on the prices of 2015-16.” While critics may dismiss this significantly upgraded growth data as the government’s political compulsion yet one would hope for clarity from the NAC on whether this data will be reviewed and finalised in May as is the usual practice or whether this is the final rate.
Thirdly, the rise in GDP in 2020-21 has to be seen in the context of the extremely low base (growth rate) in 2019-20 wherein the government, and the International Monetary Fund (IMF), acknowledge a negative 0.5 percent growth rate yet the World Bank website indicates negative 0.935 percent. As the PAC press release presents no substantiating/supporting data, it is not known which of these 2019-20 growth rates was taken as a yardstick to determine the growth rate in 2020-21. Assuming that the negative 0.5 percent was taken as the growth rate for 2019-20, though the World Bank rate would show a much higher growth rate last year than announced in May, the question is what components of the GDP may have contributed to the rise. The Large Scale Manufacturing (LSM) sector, accounting for around 10 percent of GDP, registered negative 9.78 percent in 2019-20. It is important to note that March, April and May 2020 were particularly bad months with negative 21.7 percent, negative 41.12 percent and negative 25.48 percent, respectively, which indicates an even lower base that may well account for around 2 percent of the higher GDP growth rate as calculated by the NAC.
Though detailed data is still expected, yet the Prime Minister and his team are citing a massive increase in sales of cars, cement and tractors as proof positive that growth, as an outcome of the government’s policies, is much better than envisaged. There is no doubt that last year globally there was a significant rise in purchases by households, as consumption deferred due to the Covid-related lockdown rose; however, it would be safe to assume that a major part of this rise was met by inventories rather than an increase in output.
And finally, it must be borne in mind that in May 2021 the IMF had taken more than two to three months to verify the growth rate released by the government, a verification that subsequently determined recalibration of the agreed extremely harsh conditions agreed in February 2021 under the second to fifth review, whose “harshness” remained intact in spite of Shaukat Tarin’s insistence, soon after his appointment in April 2021 as the finance minister, that he would renegotiate these harsh terms. So a higher GDP growth rate is unlikely to allow for renegotiation with the IMF.
The Prime Minister claims that poverty has declined (the World Bank notes that poverty in Pakistan was 39.3 percent in 2020-21 and projected, as opposed to calculated, a decline in 2021-22 to 39.2 percentage points) and the Ehsaas/BISP is on track (though the government has allocated 260 billion rupees to this programme against 120 billion rupees by the PML-N during its last year in government though current expenditure in 2017-18 was 4.32 trillion rupees while it is budgeted at 7.5 trillion rupees today). It can be safely deduced that something is not right, seriously amiss, especially when leading to suspicion of motive.
Copyright Business Recorder, 2022