05-02-2005, 12:00 PM
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#2 (permalink)
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Contributor
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On creative accounting in Pakistan:
http://www.dawn.com/2005/05/02/ebr1.htm
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During the brief period 1999-2001, seven million people were pushed below the poverty line. This represented the fastest growth in poverty in Pakistan’s history.
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The year 2002-03 was the first time that the economic managers claimed that the GDP growth rate had risen and exceeded the 5-percentage point mark. Partly the higher GDP growth rate in 2002-03 was obtained by changing the base year figures, i.e., the preceding year. For example, the growth rate in the Public Administration & Defence sector in the preceding year – 2001-02 – was reported to be as high as 18.2 percent. This enabled the GDP growth rate in 2001-02 to be shown at 3.6 percent. In the subsequent year, the 2001-02, the Public Administration & Defence sector growth rate was revised downwards by about two-thirds to 6.5 percent.
The lower base year figure raised the Public Administration & Defence sector growth rate in 2002-03 to 5.2 percent and the GDP growth rate to 5.1 percent. If Public Administration & Defence sector growth at 6.5 percent in 2001-02 is accepted, then the claimed GDP growth rate in 2001-02 appears to be an over-estimate; conversely, if growth at 18.2 percent is accepted, then the claimed GDP growth rate of 5.1 percent in 2002-03 appears to be exaggerated. Either way, the credibility of official claims is rendered suspect.
The underlying concerns about the data, and the claims based thereon, are heightened by inconsistencies. For example, manufacturing value added in 2003-04 is shown to have increased by 13.4 percent despite a decrease in industrial consumption of electricity, gas and oil by 19.2, 13.8 and 20.7 percent, respectively. This implies an increase of energy use efficiency of between 24 to 29 per cent between 2002-03 and 2003-04. The sharp enhancement in energy use efficiency in the manufacturing sector over the period of just one year raises questions of plausibility. An explanation is called for.
Suspicion that a part of the data is ‘manufactured’ to support claims of success is provided by a number of instances. One such glaring case is growth in tax receipts. The customs duty data for 10 out of 13 commodity groups reported in the Budget documents for the years 2002-03, 2003-04 and 2004-5 show the same growth rate. For example, the growth in customs duty receipts is a uniform 3.1 percent, 9.7 per cent, and 27.0 per cent for all 10 commodity groups for three years, respectively. That customs duty receipts have been shown to increase at the same rate for different commodity groups demands an explanation. Clearly, the data appears to have been ‘created’ by applying a uniform growth rate for the 10 commodity groups.
Yet again, tax revenue targets for 2002-03 and 2003-04 were set at Rs460.6 billion and 510.0 billion respectively. Interestingly, actual receipts were also shown to be Rs460.6 billion and Rs510.0 billion for the two years. In 2003-04, targeted and actual receipts of direct and indirect taxes were also shown to be almost exactly the same at Rs161 and Rs348 billion, respectively. Such absoluteness exactness in achieving revenue targets – and that too two years in a row – is not feasible. Clearly, the data cannot be relied upon.
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On plain vanilla misreporting to the IMF to avail of loans for purchases that would otherwise have been unavailable:
http://www.imf.org/external/np/sec/nb/2000/nb0023.htm
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"In their discussion of the issue, Directors expressed serious concern that the erroneous data had misled IMF staff and the Executive Board about economic performance; prevented the formulation and implementation of timely corrective measures; and resulted in the design of an adjustment program that was partly based on inaccurate information. They also noted that the provision of inaccurate data had allowed Pakistan to make substantial purchases under the extended arrangement and the Compensatory and Contigency Financing Facility, and under the Poverty Reduction and Growth Facility, that otherwise may not have been available.
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They noted that the misreporting of fiscal data had in part resulted from negligence in compiling and reconciling the fiscal reports for 1997/98 and 1998/99. In addition, weaknesses in the fiscal accounting, reporting, and audit procedures--including the absence of systematic data reconciliation processes and a mechanism to fully involve the Accountant General Pakistan Revenue (AGPR) in the preparation of fiscal reports--contributed to the discrepancies in the fiscal data.
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Since the irregularities happened between 1997 and 1999 under a civilian govt., we may see renewed calls on this board for continued military rule in Pakistan  . |
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