KARACHI: For a vast majority of the 150 million people of Pakistan, the inflation rate is Latin and Greek. Even persons like former President Ghulam Ishaq Khan, who served for many years as top dog of all economic related institutions of the country—governor of State Bank, secretary-general and then federal minister for finance and economic affairs —in his annual presidential address to a joint parliamentary session in 1993 questioned the credibility of official inflation rates.
This despite the fact that the Federal Bureau of Statistics that gathers information and data to draw up various inflationary indices remained under the direct control of Mr Khan when he was secretary-general of finance with late Zulfikar Ali Bhutto and then finance minister in the cabinet of the military dictator Ziaul Haq. The bureau was then, too, a resource starved and neglected government institution and it remains so till today.
According to a few retired bureaucrats who were associated with the finance ministry, Mr Khan saw to it that inflation rates were never released to the media without getting his prior clearance. Till this day, the price indices are released after getting clearance from the top bosses of the government. An old guard in the conventional mould, Mr Khan was like a serpent guarding the treasure of information. He was said to have instructed banks not to share information on remittances and loan defaults with media persons.
There is another interesting episode. Soon after he took over the affairs of the country in 1999, General Pervez Musharraf called for a detailed presentation by the Federal Bureau of Statistics on the price situation in the country. Also present was former foreign minister Abdul Sattar. He was said to have intervened during the presentation and made it clear that his wife did not believe in the officially declared prices of various grocery items. His wife, he said, regularly bought grocery herself from the market and found that prices of almost all the commodities differed from official prices.
The FBS is a low budget, ill-equipped and for all practical purposes a backroom office of the finance minister of the day who wants to use the information and data for his personal projection. The staff is neither well paid nor trained in the relevant disciplines. Unlike many government organizations, the bureau has no administrative authority. Even a senior official, like the bureau’s director, does not command the authority enjoyed by a policeman, an income tax inspector or a customs clerk. An FBS enumerator approaches the source of information with humility.— virtues that enjoy little respect in a society where value system has been set by feudal lords and corrupt bureaucrats. No wonder then that the FBS staff finds it very difficult if not impossible to gather information and data, be it for prices, industrial production, international trade or for other purposes.
A publication of the FBS reveals that the information and data gathering for retail and wholesale prices began in the year 1950. Initially, the Consumer Price Index (CPI) was computed with 1948-49 as the base for the industrial workers in Karachi, Lahore and Sialkot. Those were days when wages of industrial and office workers were indexed with inflation and dearness allowance was an integral segment of the monthly salary that quite often exceeded the basic salary.
Since then, the statisticians and the staff of the bureau have made efforts to improve upon the price indices and to make them as representative as they can within the meagre resources provided to them by tight-fisted finance ministers. Family budget surveys are carried out after every 10 years to give weightages to different categories of goods and services for groups of persons with different salaries. Normally, the last year or the first year of every decade is the benchmark year or the base year for computing indices in the following years. Accordingly, the CPI series were computed with 1959-60, 1969-70, 1975-76, 1980-81, 1990-91 and 2000-01 as the base years.
Based on the year 2000-01 the price indices are being computed on the basis of the information collected on prices of 375 items, through four quotations for each item from four shops, 71 markets and 35 cities. Overall, the indices are constructed on the basis of information gathered from 106,500 quotations for all the 375 items.
The family budget survey for 2000-01 gave revealing results in terms of weightages. For example, the food bill ratio had come down from 49.35 per cent in the 1990-91 survey to 44.13 per cent in 2000-01. As there has been significant increase in the income of a low income group person, he was forced to cut down on food consumption to meet other demands. For example, the house rent weightage increased to 21.69 per cent from 18.98, fuel and lighting to 8.01 per cent from 6.13 per cent and transport and communication 5.56 per cent from 5.08 per cent.
But this weightage index has apparently become irrelevant within five years as the cost of petrol and house rent has gone up phenomenally and now constitute a much bigger part of expenditure than in 2000-01.
A glaring defect in the indices is the computation of house rent. It is computed on the basis of construction material and labour cost. For this purpose the data is collected from the field on a monthly basis. Information is obtained about prices of bricks, sand, stone and ‘bajri’, cement, timber and wooden material, iron steel girder, paint varnish and related material. Information is also sought on wages of mason, carpenter and labour. This is basically construction index is presented as house rent.
The government is now said to have engaged consultants from the IMF to construct GDP on a quarterly basis and on other indices. For the last 10 years there have been plans to restructure the Federal Bureau of Statistics, but nothing has actually been done. The government has not been able to find people with adequate skills and competence to be engaged as statisticians and analysts.
— S.G.