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At the 107 National Accounts Committee (NAC) meeting held on 28 November 2023 approval was given to the introduction of quarterly national accounts (QNA), and announced through a press release the same day.

The process as per the press release began “soon after the approval of new base of national accounts adopted in January 2022. PBS (Pakistan Bureau of Statistics) held discussions with the World Bank for technical assistance on QNA and online technical meetings started on 22nd June, 2022 with the World Bank Expert which continued till June 2023. Moreover, a technical committee of national experts reviewed the methodology, sources and results during July-August 2023.

The experts included members from Ministry of Finance, Ministry of Planning, Development and Special Initiatives, State Bank of Pakistan, Pakistan Institute of Development Economics (PIDE), Quaid-e-Azam University and Independent industry.” To highlight three salient features of the statement: the decision was taken during the tenure of the Pakistan Tehreek-e-Insaf, World Bank technical assistance was successfully sought for launching the exercise and experts included members from the public and private sector as well as academics.

The International Monetary Fund (IMF) included the calculation of the QTA as a structural benchmark of the 3 billion dollar Stand-By Arrangement (SBA) documents dated July 2023 and specified that “Pakistan Bureau of Statistics (PBS) will compile and disseminate the First Quarter estimates for 2023-24 and the revised annual estimates for the financial year 2022-23 by end-November 2023.”

Independent economists have voiced their concern about PBS’s failure to present seasonally adjusted quarterly QTA, acknowledged in the PBS’s uploaded documents – an adjustment useful in identifying and estimating the different components of a time series, and thereby provide a better understanding of the underlying trends, business cycle, and short-run movements in the series. While seasonality obviously impacts on many crops/industries (for example the ice cream industry witnesses a substantial drop in sales in winter) yet these economists may have overlooked PBS’s following statement: “The GDP estimates have been released to meet IMF structural benchmark under tight deadline and are based on available information and data. However, as a matter of practice and due to the time-lag involved in the finalization of data for the last two fiscal years, the annual GDP estimates are subject to revision in the NAC meeting to be held in May 2024.”

In Pakistan’s case, however, a change in the budgeted external and/or domestic (borrowing) inflows between one quarter to the next would heavily impact on QNA fluctuations: (i) external inflows were budgeted at 24 billion dollars this year; however, less than 25 percent have been realized to date. This is mainly attributable to a rating freeze by international rating agencies in spite of the staff level agreement on the first Stand By Arrangement review which has implied the budgeted 6.1 billion dollars from foreign markets may not be forthcoming; which led to higher than budgeted reliance on (ii) domestic borrowing which reached a historic high of 3.585 trillion rupees (July to 8 December 2023) against 3.7 trillion rupees for 2022-23, or 97 percent of last year’s total in just five months. Given that this not only crowded out private sector borrowing with a negative impact on output but also that the government used it for current expenditure, again not backed by a rise in output, one can conclude that QNA for the next quarter would be considerably lower.

NAC press release goes on to claim that “GVA (gross value added) growth rate of 2.13% has been estimated for Q1 2023-24 as compared to Q1 2022-23. Agriculture has shown a growth of 5.06 percent, industry 2.4 percent and services 0.82 percent. In agriculture, crops are posting healthy growth of 6.13 percent including 11.16 percent growth in important crops. The major driver for growth in important crops is the increase in sowing area in comparison with last year.”

PBS website further notes that the compilation of QNA was undertaken to achieve four major objectives: (i) to gauge the pulse of the economy at shorter intervals. There is no doubt that QNA would provide the policymakers with a tool that can enable them to take decisions in a timely manner and avert possible catastrophes. Critics may argue that this optimism maybe misplaced as there have been a plethora of flawed policy decisions, foremost amongst which, are a steady annual rise in current expenditure consuming ever larger chunk of the budget and routine (with no exceptions to date) backing down by a finance minister on major policy reforms as and when his/her political boss gives a thumbs down accounting for a sustained failure to reform the energy or tax sub-sectors or implement pension reforms to this day. (ii) The press release notes QNA would enable Pakistan to qualify for special dissemination standards. A 2007 IMF publication titled “Special Data Dissemination Standard Guide for Subscribers and users” provides the necessary background where the IMF’s work on data dissemination standards began in 1994-95 after “international financial crises, which underscored the role that information deficiencies could play in contributing to market turmoil” and led to identifying four dimensions: Coverage, periodicity (frequency), and timeliness; Access by the public; Integrity of the disseminated data; and Quality of the disseminated data. Sadly, all our revolving finance ministers have a tenuous record at best of supporting data integrity. (iii) Policymakers to take timely corrective decisions during a fiscal year. Our long and rather less than exemplary economic policymaking history reveals that the only corrective measure taken by administration after administration is to pass mini-budgets that are entirely focused on raising revenue from existing indirect taxes as they are easy to collect and do not challenge the elite capture with, current non-development expenditure rising by more than was budgeted (with severe inflationary implications).

And finally, the last objective cited by the PBS is that QNA is for researchers and academicians to better their forecasting models. In this context independent researchers and forecasters are routinely lured into a high level economic advisory council by our revolving finance ministers with the objective of staying their public criticism of policies and implementing only minor recommendations, if any. However, without critiquing the methodology of QNA it is critical to note that in other countries, including the US, QNA may vary markedly from one quarter (going from negative to positive or the other way round) due to the fact that an open economy is impacted by domestic policies as well as global politico-economic conditions.

To conclude, while introducing QNA must be supported, yet with data routinely manipulated by all finance ministers to show a better performance than is in fact the case, this exercise’s usefulness may be severely compromised.

Copyright Business Recorder, 2024

Comments

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John Jan 09, 2024 12:03pm
"To conclude, while introducing QNA must be supported, yet with data routinely manipulated by all finance ministers to show a better performance than is in fact the case, this exercise’s usefulness may be severely compromised." What else to expect from the Crooks & the Compromised Inc!
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Hasnain Jan 09, 2024 11:25pm
@John, All efforts to save their skins are ending up in vain!
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