Foreign lenders concerned over manipulation of GDP growth figures

[Naveed Yaseen]

By Khalid Mustafa
ISLAMABAD: International Financial Institution (IFIs) have expressed alarm over the manipulation and change in methodologies of calculating the GDP of construction and agriculture to bring the current fiscal’s GDP growth closer to 2.5 per cent target as agreed with the IMF, a senior official at the Ministry of Finance told The News.

“Earlier the state-controlled Federal Bureau Statistics came up with projection of 2.37 per cent GDP growth that was very close to IMF target, but The News identified the faults committed by the authorities in measuring the GDP growth,” the official said.

“The Finance Ministry took notice of the issue and corrected only one fault by including the -7.7 per cent growth of Large Scale Manufacturing for July-March causing 2.37 per cent GDP to further tumble to 2 per cent,” he added.

Earlier FBS and National Account Committee (NAC) included only the LSM growth of -5.7 percent registered during in July-February period.

The FBS also changed the methodologies for measuring the construction and agriculture growth without informing the NAC.

Furthermore the FBS has also reduced the size of the GDP at current market price by Rs350 billion some three days ago without informing the competent forum of NAC.

The reduction of Rs350 billion in GDP at market price will have far reaching consequences for many key macro-economic variables such as per capita income.

When contacted for comments, Asif Bajwa, spokesman of Finance Ministry said that there stands no major change in the methodologies and said that he is not aware of any displeasure shown either by IMF nor World Bank has shown any sort of displeasure over the method of calculating the GDP growth. Bajwa said he is not competent authority to respond to such technical issues.

Advisor to Prime Minister on Finance Shaukat Tarin was not in the country as he is in Iran as a part of delegation of President Asif Zardari.

Coming to the change in methodologies in construction and agriculture sectors, The News managed to get the document, which clearly says that the construction sector covers land improvement, construction of residential and non- residential buildings, highways and bridges and other construction activities.

The document says that due to non-availability of authentic data on construction activities, the NAC in its 85th meeting held in May 2006 had decided the size of the construction activities may be ascertained with consumption of cement and steel.

The NAC gave the approval of change in methodology in 2006, but this year FBS changed the methodology in the 88th meeting of NAC held on May 16, 2009 with informing the committee.

As a result of change in methodology, the last year’s number of value added in construction changed drastically from positive 15.2 percent growth in construction sector to -3.9 percent, a variation of 19 percent. This is one reason for the downward adjustment of last year’s growth from 5.8 percent to 4.1 percent.

The question arises here why NAC was not informed of change in methodology? Has NAC given the approval to the change to new methodology in construction? Is FBS now capable to get authentic data on construction activities?

Similarly, FBS also changed it methodology on measuring the value added in major crops without bringing it to the notice of NAC.

Within a week of NAC meeting held on May 16, 2009, major revision in national accounts have taken place such as reducing the GDP growth estimates for current fiscal from 2.37 percent to 2 percent. This has put the credibility of the government in jeopardy in the eyes of international financial institutions.

http://www.thenews.com.pk/daily_detail.asp?id=179656