A press release from Ministry of Finance on the discrepancy in growth figures in the Memorandum of Economic and Financial Policies (MEFP), attached to the Letter of Intent (LoI), signed by Minister of Finance Ishaq Dar and Governor State Bank of Pakistan Ashraf Wathra, addressed to the Managing Director of the International Monetary Fund Christine Lagarde dated June 19, 2014 has shown growth figures that were "inadvertently" showing much lower than the Government of Pakistan's estimates. The clarification says GDP growth of 4.3 percent was shown as 3.3 percent (FY 2013-2014) for the outgoing year and four percent (FY 2014-15) instead of five percent for the current financial year. In our issue of 9th July BR Research has pointed out that: "The IMF had revised the outgoing year figure from 3.1 to 3.3 percent while PBS numbers are at 4.1 percent. Independent Economists' view is that economy grew at 3.5 percent in FY14. The Fund's growth projection for FY15 is up by 30 basis points to four percent. This may be on the conservative side as the economy may grow according to our research department's estimates at 4.5 percent. The government target, on the other hand, appears to be too optimistic at 5.1 percent." Business Recorder described the targets given in the Memorandum as IMF estimates because the Government of Pakistan, as per practice, receives the draft of the memorandum for correction and agreement prior to its placement before the Board of Directors of the IMF.
It may be recalled that the venue of the third review meeting between the Fund staff and government officials was "offsite but with COMs assistance the mission chief conducted a joint press conference...in Islamabad." During the press briefing, the Finance Minister claimed a growth rate of 4.1 percent while the IMF mission chief maintained a projected growth rate of 3.3 percent. Neither man contradicted the other leading many to believe that Jeffrey Franks relied on the media to pick up the discrepancy while at the same time allowing Dar to claim a higher growth rate for the benefit of the Cabinet and the local media.
We are indeed disturbed at the deterioration in the capacity of the Finance Ministry from reviewing a document with a fine-tooth comb, which was attached to the Letter of Intent duly signed on behalf of the Government by the Federal Minister and on behalf of the State by the Governor SBP. Growth numbers, current account deficits, forex reserves, balance of payment (BoP) position are indeed sensitive numbers and do not fall under the category of miscellaneous figures. The primary data of growth indeed comes from the same source, ie, Pakistan Bureau of Statistics (PBS). Its break-up largely depends on performance of manufacturing, agriculture and services sectors. Data on the real economy is painstakingly collected to work out the growth estimates by PBS. The Federal Minister of Finance may have the political compulsions to maximise growth, but the Federal Finance Secretary and Director-General PBS are state functionaries with "Fiduciary Responsibilities" towards the nation. We know that they enjoy their positions at the pleasure of the Minister. Needless to say, the legitimacy or propriety of a tenure in Pakistan is no longer valid. The nation has seen three governors of SBP depart before end of their tenures. The Finance Secretary is also the Alternate Governor to the Fund. His staff (External Finance Wing) needs to vet the IMF draft and the projections given. In case the IMF data needs to be changed, the Finance Minister and the Governor need to be told. And, amendments if any, are duly counter-signed by them to avoid embarrassment in future. Exceeding projections is no negative or positive act because projections at best are guesstimates and are not cast in stone. But let us not let a fudge turn into a gospel truth. Instead of facetiously relying on the 'inadvertent error' ruse, the Finance Ministry's clarification should have explained the fact that Memoranda carry IMF projections that change with every review as data is received on an ongoing basis. The government has to rely on PBS estimates and not on IMF projections to put the matter in right perspective. GDP data all over the world is revised on an ongoing basis and facts and statistics collected together for reference or analysis are termed provisional until the National Income Accounts Committee collates them with a view to shaping up a final document.
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