ISLAMABAD:
The finance ministry has issued a rebuttal to the report in The News
titled “GDP Growth Worked Out?” written by Khalid Mustafa, published on
June 23, and called it misleading and based on an ignorance of the
system of computation of GDP estimates followed in Pakistan as well as
internationally.
It said the reporter is harping on
the issue that the GDP growth number for 2013-14 are much lower than
those estimated by the PBS.
This issue has already been
responded by Pakistan Bureau of Statistics (PBS) in different
newspapers.“It is clarified that annual estimates of GDP as well as GFCF
for the year 2011-12 (Final), 2012-13 (Revised) and 2013-14
(Provisional) were approved by the National Accounts Committee (NAC)
Meeting on 15th May, purely on the basis of data available up to that
point of time and not in accordance with the desires of any one in the
government hierarchy. The data for the balance of the year is projected,
which is the reason that these numbers are provisional and remain
provisional till full data becomes available over the following months.
The correspondent has also commented on the quarterly GDP estimates.
The
first quarter growth and the second quarter/mid-year growth, both were
released by PBS; one is acceptable to the writer while the other is not.
The IMF accepted the figure of PBS which should be ample proof of the
reliability of the statistics released by PBS.
As far as
the question of withholding the information of large scale manufacturing
is concerned, it is completely baseless. The Quantum Index
Manufacturing Industries (QIM), the indicator being used to measure the
performance of this sector, is compiled on the basis of information
received from three major sources including Oil Companies Advisory
Committee (OCAC), Ministry of Industries and Provincial Bureau of
Statistics which takes time and is published after certain time lag. The
latest available information was up to the month of February, 2014 was
used to derive the estimates of large scale manufacturing which were
approved by the NAC. Further, the writer has completely misstated the
facts by quoting that the budgeted PSDP of Rs1150 billion has been used
in the compilation of value addition of construction. The fact is that
total value addition of construction sector even at current prices is
Rs494.3 billion; therefore, the question of inclusion or exclusion of
these PSDP figures is not relevant.
The correspondent has
also mistakenly attributed the profits of commercial banks with the
value addition of finance and insurance sector. The value addition of
this sector, being compiled through Financial Intermediaries Services
Measured (FISM), is based on the amount of advances and loans and not on
profits of banks.
The correspondent gives his verdict
that the GDP growth is 3.5 %. He has not given any analysis to support
his claim but has picked up a number that is being bandied about in the
press. The commentators need to familiarise themselves with the methods
of GDP computation before commenting on technical issues.
In
connection with his view on budget number to show lower budget deficit;
it is stated that writer’s view is not correct. PTA is a government
authority responsible to collect the licensing / auction fees on behalf
of the federal government and such auction fees on behalf of the federal
government and such auction fees are always form part of the Federal
Consolidated Fund. Similarly, the non-tax revenues receipts are revenue
of the federal government administered by various
ministries/divisions/departments and comprise of following main sources:
i) Income from property and enterprise, ii) Receipts from civil
administration and other functions, iii) Miscellaneous receipts.
The
income from property includes the mark up recovered from the provinces
and public sector enterprises, dividend and other receipts of the
regulatory bodies. The receipts from civil administration comprise of
State Bank of Pakistan (SBP) Profit, Defense Receipts, Law & Order
Receipts etc.
The foreign grants are reflected under
non-tax receipts according to the Chart of Accounts, as per
International Best Practices. These are always form part of the federal
government and the actual receipts under these heads can be verified
from the historical data disseminated on the Website of the finance
division.
Khalid Mustafa adds: I am grateful that the
Ministry of Finance has given me the opportunity to further highlight
the mistakes the government has committed in calculating the provisional
GDP growth of current financial year 2013-14 at 4.1 percent. The
article I wrote in Money Matters — the magazine of The News
International which was published on June 23, is not misleading, rather
it mirrors the manipulations done to show better GDP growth.
Some
of the issues the finance ministry has raised in the clarification I
have factually not mentioned in my article. For example, I have not
mentioned anything about the revised GDP growth targets; rather I kept
my focus on provisional GDP growth which the government has worked out
based on the numbers of first 9 months of the current fiscal which suit
the government.
Coming to paragraph three of the
clarification, I know very well that PBS came out with the
work-in-progress quarterly estimates of GDP and according to PBS
calculations, as per the work in progress, the real GDP grew by 5.1% in
the first quarter of 2013-14. The officials of PBS went to show this
number to finance minister; because that was the first time they
calculated quarterly GDP. The finance minister got excited knowing the
fact that this is a work in progress and went ahead and informed Prime
Minister Nawaz Sharif, and leaked the number to the press.
It
attracted widespread criticism from professional economists because the
number was beyond their expectations. After that the finance minister
started saying, “I don’t own this number, but at the same time I don’t
disown this number.”
In the paragraph 4 of the
clarification, finance ministry claimed that it has not withheld the
information about Large Scale Manufacturing (LSM). I do not agree with
the ministry as it has withheld the information of large manufacturing
scale for the month of March that shows negative growth of 2.7% and for
July-March period, the number was down to 4.3% as opposed to 5.3% used
in calculation of the GDP keeping in view of the number of first 8
months not the 9 months. Here the government has visibly played the
foul.
About the 11% growth in construction sector the
government has worked out is highly questionable as there is no
one-to-one correspondence between PSDP and value added in construction.
It is known to everyone that construction growth is derived from the
cement production and growth in cement production has alarmingly stayed
at 0.13% which is almost flat. When there is flat growth in cement
production, then how construction sector can grow by 11%. The 11% growth
in construction sector becomes more controversial when the PSDP has
already been slashed to Rs393 billion. Here I would appreciate if the
government shares with the masses and with me the methodology of
calculating value added in construction as the 11% growth in
construction sector is not understandable. If the cement is not
utilised, then what’s the rationale of 11% growth in construction? Here
I’ll be happy to see the methodology used by the government.
In
the clarification, the ministry has criticised the author of the
article saying he had given his verdict that the GDP growth is 3.5%
without any analysis to support his claim. Here I want to clarify that I
have mentioned 3.5% growth with supporting facts by stating both saving
and investment have declined sharply compared to last year. How on the
earth, GDP growth can accelerate in the midst of declining saving and
investment rate. I will appreciate if the government clarifies this
anomaly.
In the clarification the ministry stated that
writer’s view is not correct on government’s intention to show the
better growth arguing that PTA is a government authority responsible to
collect the licensing / auction fees on behalf of the federal government
and such auction fees on behalf of the federal government and such
auction fees are always form part of the Federal Consolidated Fund.
Similarly, the non-tax revenues receipts are revenue of the federal
government administered by various ministries/divisions/departments and
comprise of following main sources.
Here I clearly want to
mention that I did not raise the said issue what clarification says.
However, I did mention about the utilisation of Universal Services Fund
(USF) for which cellular companies contribute a certain portion of their
profits. USF is meant for infrastructural development in
telecommunication sector and the huge amount in the fund was accumulated
over the last several years and how can the government use the
resources accumulated over the years in just one year. To the best of my
knowledge, cellular companies have already gone to Supreme Court and
challenged the taking over of this amount as non-tax revenue.
In
the last paragraph of the clarification, the finance ministry says that
the foreign grants are reflected under non-tax receipts according to
the Chart of Accounts, as per International Best Practices. If this is
the best international practice, then why does IMF treat fiscal deficit
separately with and without foreign grants.
The Finance
Division is best advised to look at the IMF program document. By
treating foreign grants as revenue, the government has eliminated the
difference and readers can see in the IMF document, particularly in
fiscal table that foreign grants appear as separate line item and has
never been treated as part of non-tax revenue.
Therefore, the author stands by its article.