Growth & inflation statistics

Published January 19, 2023
The writer is a former deputy governor of the State Bank of Pakistan.
The writer is a former deputy governor of the State Bank of Pakistan.

OUR inflation data compiled by the Pakistan Bureau of Statistics (PBS) is one the best datasets in the country. Its coverage is wide and not only does it follow data quality standards but also maintains excellent dissemination standards. Look at the various indices compiled: NCPI, UCPI, RCPI, UCPI-NFNE, RCPI-NFNE, UCPI-Trim, RCPI-Trim, WPI and SPI.

These are the consumer price indices for the country, the urban areas, the rural areas, core CPI, excluding food and energy, for urban and rural, core trims of CPI for urban and rural, wholesale price index (WPI) and the sensitive price index (SPI). What do they say about inflation? Are we always overwhelmingly concerned about inflation? Inflation in the entire country and, more distinctively, in the urban and rural areas?

Citizens are concerned as high inflation squeezes their budgets and they, resultantly, suffer. Citizens, however, are not necessarily concerned with all the indices above. To them, the SPI (it is in the news every week) and CPI for the entire country matter the most.

It is good that citizens are kept informed about price changes. Should not PBS keep us informed about GDP or real sector data more frequently? One can argue that even in the complete absence of inflation data, citizens have a good sense of day-to-day prices because they shop every day. But they perhaps know less about growth and employment data. Hence, growth and employment data are more important to disseminate.

Informing citizens about what is happening in the economy is only one of the objectives of statistics compilation and dissemination. A more important objective of growth and inflation data is for policymakers to analyse the data and take timely, appropriate actions to contain inflation and promote growth — and to balance these competing aims.

Another important objective is for researchers and analysts to produce proposals or critiques to inform and guide policymakers and citizens. From this angle, those indices which are useful to citizens, policymakers, and researchers alike are far more important.

Meanwhile, urban and rural CPI is seen as less important than the national CPI. National policymakers (ie fiscal, and monetary authorities) should emphasise national inflation and national growth numbers while taking policy decisions.

International best practices do not require finance ministers to govern statistical agencies.

Despite a profusion of price statistics, two important indices are missing from PBS and State Bank dissemination. These relate to core national inflation. One wonders why these are missing, while less important regional core inflation measures are being disseminated and analysed.

Perhaps the State Bank is estimating national core inflation measures internally, but why it is not publicising the information is perplexing. Also troubling is the fact that the central bank occasionally refers selectively to urban or rural CPI inflation in its reports, when it should be doing this for national CPI core inflation. Both the PBS and State Bank should estimate and disseminate national core inflation figures in their data releases.

Compared to the availability of price data in our country there seems to be a dearth of timely availability of real sector data. National income data is annual and becomes available with a lag of one year. There is no compilation and dissemination of quarterly GDP.

Our authorities seem content with the annual figures but are averse to quarterly GDP and employment data. Their high concern for short-term growth does not translate into demand for more frequent and timely data.

Some 96 countries compile and disseminate quarterly GDP. They include, amongst others, Egypt, India, Indonesia, Saudi Arabia and Sri Lanka, according to the IMF’s International Financial Statistics dataset. Around as many countries compile only annual GDP, and we seem content to belong to that group. To its credit, PBS started compiling and disseminating quarterly national accounts in FY14.

However, it abruptly discontinued the practice, probably at the behest of the government. It also discontinued its initiative of undertaking and disseminating the findings of the quarterly Labour Force Survey, presumably because of the same reason.

It is surprising to see the authorities’ disdain for timely real sector data compared to inflation data, given the concern for promoting growth over containing inflation. This leaves us with data for large-scale manufacturing compiled monthly by PBS with a lag of about two months.

Researchers who usually rely on quarterly GDP are forced to use the LSM index as a proxy for growth in the entire economy, or use annual data for their analyses. Since PBS has full expertise and experience to compile and disseminate quarterly GDP and employment data, its discontinuation points to governance issues affecting its scope of data compilation. The problem seems to lie with the chair of the governing council of PBS.

According to the General Statistics (Reorganisation) Act, 2011, which gave considerable autonomy to PBS, the finance minister is chairman of the PBS governing council. This council is also empowered to approve the annual work plan of PBS in addition to other governing roles.

The finance minister can easily influence the council to alter the set of statistics compiled by PBS. International best practices do not require finance ministers to govern statistical agencies. This role is best performed by an experienced and competent statistician or economist from the private sector or academia.

The act requires the governing council to “prepare and publish an annual report covering its activities carried out during the financial year for submission to the federal government which shall lay the same before the parliament”. No such reports are available on the PBS website.

The Statistics Act also empowers PBS to constitute a users council to “advise on priorities for filling the gaps in statistical data” and perform various other guidance and advisory functions. No such council, which is supposed to have representation from the private sector, was ever constituted by PBS, or it is missing from its website. It seems that in the absence of the users council and the presence of the finance minister on the governing council, PBS is likely to be constrained from meeting its objectives set out in the General Statistics Act.

The writer is a former deputy governor of the State Bank of Pakistan.
rriazuddin@gmail.com

Published in Dawn, January 19th, 2023

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