EDITORIAL: Pakistan Bureau of Statistics (PBS) released the following data for the last month of 2023: (i) consumer price index (CPI) which takes account of the prevailing rupee-dollar parity as imported items, particularly petroleum and cooking oil are considered in its calculation, rose to 29.7 percent against 29.2 percent in November.
What is baffling is that CPI rose by 0.5 percent notwithstanding the fact that the average rupee-dollar parity was 285.52 in November declining to an average of 283.48 in December, while (ii) core inflation that is non-food and non-energy was shown to decline from 18.6 (urban) in November 18.2 percent in December (a decline of 0.4 percent), 25.9 percent in November (rural) to 25.1 in December (a decline of 0.8 percent); and (iii) Sensitive Price Index (SPI) for the week ending 28 December 2023 registered 43.25 percent higher year on year than the comparable period of the year before, higher than the previous week’s SPI by 0.37 percent.
Independent economists have begun challenging data integrity, a challenge that is unusual during a caretaker setup as, at least theoretically, they face little political pressure. Be that as it may, three observations are in order. First, the PBS data reveals that the CPI registered a rise of 3.77 percent July-December 2023 against the comparable period the year before no doubt partly due to the rupee-dollar parity after Ishaq Dar was appointed as finance minister artificially and disastrously kept at a low of 224.7 in December.
CPI urban rose by 4.9 percent during July- December 2023 and rural by 2.06 percent against the comparable figure for the first half of 2022. This rise is not attributable entirely to the administrative measures taken by the caretaker setup to ensure the staff level agreement reached on the first review of the stand by arrangement on 15 November 2023 but also to the massive and unprecedented 200 percent rise in reliance on domestic borrowing in 2023 against 2022 – to 2.8 trillion rupees this fiscal year against 961 billion rupees last fiscal year – money injected back into the economy under the head of current expenditure, which is not backed by a rise in output and therefore is highly inflationary.
Second, SPI rose from 28.21 percent July-December 2022-23 to 31.58 percent in the comparable period this year; however, what should be a source of extreme concern to the caretakers is the fact that the December 2023 SPI figure is 40 percent higher than the average of the first six months - at 43.25 percent.
And finally, the PBS maintains that there has been a decline in the Wholesale Price Index - to 34.10 percent July-December 2023-24 compared to 25.37 percent in the comparable period of the year before. This decline is, at best, surprising but, at worst, indicative of a deliberate but rather amateurish attempt to justify claims by the caretakers - the December 2023 Update highlights “signs of potential recovery in the industrial sector reflected by positive trends in high-frequency indicators” - and the Monetary Policy Statement of 12 December 2023 which notes unconvincingly that “the manufacturing sector also recorded a moderate recovery, with growth in large-scale manufacturing (LSM) becoming positive after contracting in the preceding four quarters.” These claims are not backed by the Finance Division’s Update, which uploaded an LSM growth of negative 0.44 percent (July-October 2023) as the wholesale price index declining is simply implausible after the IMF mandated administrative decisions to raise utility prices was taken.
Data integrity is critical to economic team leaders’ capacity to take timely appropriate mitigating measures. And while one can understand a political government’s focus on data manipulation and making use of all available statistical tricks to window dress the numbers yet the same cannot be applied to a caretaker government that does not have to solicit votes from the people at large and whose performance will be assessed within a macro and not a micro context. One can only hope that data integrity becomes an overarching objective of the administration, which would enable the cabinet to take informed and timely decisions.
Copyright Business Recorder, 2024