Why fudge the figures?

Published May 30, 2009

RECENT press reports about the fudging of GDP estimates for the outgoing fiscal year were a source of deep personal anguish. Between 2002 and 2006, one had struggled, albeit without success, to impress upon the self-proclaimed champions of accountability, transparency and good governance that manipulating data never pays.

Data on poverty, unemployment, GDP growth and prices was 'improved upon'. The result, however, is that other than a small group of hagiographers, no one believed the achievements that were claimed.

The Pervez Musharraf-Shaukat Aziz combine was constantly under pressure to justify their usurpation of power. Doing wonders for the economy and going on about these in daily bulletins was their only hope of legitimising themselves in the eyes of the general public. However, advised by some over-enthusiastic practitioners of the dismal science called economics, they went for the overkill. At the end of the day, it was the economy that brought them down.

Political regimes have been accused by their detractors of economic mismanagement, but never of fudging figures to suit their agendas. The cynic would say they do not have the 'competence' to indulge in this enterprise. The fact of the matter is that being legitimately elected governments, they did not have to. That is why the recent reports are extremely disturbing.

It is difficult to believe that the president or prime minister took more than routine interest in the matter. They have enough on their plate already. Adviser Shaukat Tarin has been pleading ignorance. He has been a bit enthusiastic in his pronouncements about the agenda for reform, but he seems to have done the right thing by changing himself in the face of facts and going the other way rather than ordering the rewriting of facts.

What, then, is happening? Remember the story of the prisoner freed after serving a long sentence? He returned to prison on the plea that this was the only world he knew! Unlike the past, nobody told the Federal Bureau of Statistics or the National Accounts Committee, the deciding forum headed by the secretary of the statistics division, to do anything other than their job. Like the prisoner who came back, there is perhaps this inability to return to the real world and to mechanically reproduce the ways of the past eight years. Lack of professional leadership and failure to invest in the human resource of the Federal Bureau of Statistics reinforces the attitude of being more loyal than the king.

With an unusually adverse external and internal environment, no one in her/his right economic senses is expecting a growth miracle in 2008-09. The planners kept their sights lower when they fixed a target smaller than the achievement in the previous year — 5.5 per cent against 5.8 per cent. When the country entered into negotiations with the IMF on the reigning standby arrangement, it said 4.5 per cent and the other party 3.5 per cent. Subsequent consultations brought the GDP growth target down to 2.5 per cent. Growth is likely to be the same or perhaps lower than the population growth of around two per cent. This would imply a decline in GDP per capita, something that the economy has not experienced since the 1950s.

Thus the initial reports of the National Accounts Committee deciding on a GDP growth rate of 2.37 per cent were not surprising. It was lower than the official target of 2.5 per cent and quite credible. It is unfortunate but not unusual that the previous year's growth is also revised at this time in the light of more and better information that becomes available. Nevertheless, the revisions are not so drastic as to bring down the number from 5.8 per cent to 4.1 per cent. Keeping it at the original level would have meant a reduction of GDP per capita in 2008-09.

Estimating GDP for the whole year when the year is not yet complete has its problems. The normal practice is to include all information available at the time of the meeting of the National Accounts Committee. When to hold this meeting becomes an important decision. Late May meetings are held when better information is expected until April. Early May meetings are aimed at avoiding data coming in later. But to avoid data that has become available cannot but be described as fudging. It was not appropriate to account for a decline in large-scale manufacturing growth of 5.7 per cent during eight months when the higher decline of 7.7 per cent was known for nine months.

There are also reports about a change in methodology for estimating growth in the agriculture and construction sectors. Existing methodologies do have a number of problems. Incorporating changes has a set procedure. In general, an experts committee is set up well in advance and its recommendations are made public before changing the methodologies. But if the change has been made in an instant move to fix unpleasant results or to obtain a desired result, even a better methodology can be used to fudge figures.

It is hoped that the problem related only to which number to use and how — and did not, as in the past, go to the extent of distorting the primary dataset, a practice perfected into an art by the regime of Shaukat Aziz. It then becomes difficult even for professionals to detect any wrongdoing. Application of the same methodology to process data will yield the same result and there will be variations when the methodology changes. Only a criminal investigation or judicial inquiry into the matter can prove to be of help in unearthing the truth.

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