Article for Business Recorder

Who is the Spin Doctor?

by
Dr. Ashfaque H. Khan
It is not uncommon to see that when an individual comes under severe criticism and fails to
respond professionally to his critiques, he loses rationality and indulges into personal attacks. A
case in hand is our Finance Minister who resorted to personal attack on his critic, when he was
exposed for grossly manipulating key economic statistics.
In a recent pre-budget seminar organized by one of the local television channels, I exposed the
minister for forcing the senior staff of the Pakistan Bureau of Statistics (PBS) to get his desired
economic growth number. The inside story of forced economic growth also appeared in an
English daily on May 21, 2016. Instead of responding professionally, the finance minister
indulged into personal attack by calling me a Spin Doctor. In the past, he also described one of
his critics as pseudo economist.
In this article I intend to show that the GDP growth number is grossly inflated for the year 201516. This is not the first time that the minister forced the PBS to get the desired number. In fact,
the real GDP growth for the last three years has been inflated to misguide the people of Pakistan
and to inject a false sense of prosperity.
The readers would know that for the last three years, we have been experiencing three types of
economic growth. One is the asking rate of growth, asked by the finance minister. Second is the
delivered rate of growth, delivered by the PBS and the third one is the growth estimated by
independent economists. In the year 2015-16, we have added a fourth rate of growth, that is,
forced rate of growth, forced by the finance minister.
The forced rate of growth is 4.7 percent for the outgoing fiscal year 2015-16 as against a
growth of 3.1 percent estimated by the independent economists. Based on the performance of
cotton crop (-34 percent), rice crop (-2.7%), maize crop (-0.3 %) and wheat crop (0.0 %), I had
estimated the real GDP growth to be in the range of 3.0-3.5 percent for the year 2015-16. Dr.
Hafiz Pasha and his team in Social Policy Development Centre (SPDC) estimated the growth at
3.1 percent, which falls in my forecast range.
Why we believe that the growth as reported by the government (4.7 %) for the year 2015-16 is
grossly exaggerated? Firstly, the finance minister wanted to state in his budget speech that We
have achieved the highest growth rate in the last eight year. He did the same thing in his budget
speech of 2014-15 fiscal year when he had stated that We have achieved the highest growth rate
in 2013-14 in six years. For this to say, he manipulated the growth statistics of 2011-12 which
were brought down from 4.4 percent to 3.8 percent and as such became lower than 2013-14 (4.0
%).
Secondly, growth rate in 2015-16 has been overstated in ten out of 18 sectors of the GDP, as
reported in the SPDC report. Whenever agriculture Governments Number SPDC Number
registered a negative growth (like this year), real Agriculture - 0.2%
- 2.0%
GDP never registered a growth that exceeded 4 Industry
6.8 %
5.5%
Services
5.7%
4.1%
percent in the last four decades. How come with a
GDP
4.7%
3.1%
negative growth in agriculture, the real GDP

growth accelerated to 4.7 percent? The estimate of 3.1 percent by independent economists,
therefore are consistent with historical facts (See Table).

Thirdly, the very fact that the GDP estimates are manipulated can be seen from the facts that
provisional real GDP for the year 2014-15 is identically equal to the revised estimates for 201415 (See Table). The readers would know Years
Provisional Revised Final
Result
that the provisional GDP estimates are
2013-14
10,211.4 10,217.1 100.1%
based on 6 to 8 months information while 2014-15 10,644.3
10,629.7
99.9%
the revised estimates are based on 12 2015-16 11,130.0
months information. How come these
estimates are identical to each other? Similarly, the revised and final estimates of 2013-14 are
also identical. Such a perfect estimate can never be found elsewhere in the world. This can only
happen in our finance ministers world.
Fourthly, the students of economics are aware of a key economic term, known as marginal
propensity to consume (MPC). In plain language, it states that if an individuals income increases
by Rs 100, how much his/her consumption will increase, may be Rs 80 or Rs 85?. That is, the
MPC is defined as change in consumption as a result of a change in income. In other words, the
MPC range between 0 and 1. In developing countries, MPC is found to be in the range of 0.80.85 and in developed countries it ranges between 0.4 (China) to 0.7.
While inflating GDP number, the PBS forgot that as a result of their manipulation the MPC has
turned out to be 1.23, which is against all economic wisdom. The readers would know that
consumption is treated as a residual item in our national income accounts. When GDP number
was inflated, given the other components of GDP which were estimated, the residual got inflated,
which, in our case, is the consumption expenditure. Even if we exclude government consumption
expenditure and concentrate only on household final consumption expenditure, the MPC is
estimated at 0.94 which is very high from developing countries perspective. What kind of
statistics are we producing? We should be ashamed of releasing such statistics.
Fifthly, growth is the outcome of the type of macroeconomic policies pursued by the
government. It is important to note that the successive governments including the present one,
have been pursuing an IMF dictated Stabilization First or Austerity policy since 2008-09.
Stabilization First is an anti-growth, anti- job creation and anti-people policy. How come
economic growth accelerated to 4.7 percent in 2015-16 when the government was pursuing an
anti-growth policy with dirty fiscal adjustment? Can the finance minister explain this policy
conundrum?
Trends in Private Sector Credit and PSDP as % of GDP
(End June)
5
4.5

Private Sector Credit as % of GDP

4
3.5
3
2.5
2

PSDP as % of GDP

28
26
24
22
20
18
16
14
12
10

Sixthly, economic growth accelerates when

both private and public sectors increase their spending. What is happening to private and public

sectors spending? The readers would know that private sector borrowing from commercial
banks as percentage of GDP is on the decline over the last one decade. This ratio was 27.1
percent in 2007-08 which declined drastically to 15.0 percent by 2012-13 and declined further to
14.3 percent in 2015-16 (See graph).
Public Sector Development Program (PSDP) also declined from 4.7 percent to 3.6 percent during
the same period. Can the finance minister explain as to how economic growth accelerated in
2015-16 when both private sector borrowing from commercial banks and PSDP as percentage of
GDP are on the decline?
How many more proofs are needed to suggest that the economic growth number (4.7 %) is
grossly exaggerated? The true economic growth is 3.1 percent in 2015-16 as reported by the
SPDC. Who is then the real Spin doctor? The one, who is exposing the government for
manipulating statistics or the one who is manipulating the statistics and presenting them with
bold face? I leave it to the people to decide. I would urge the minister that when faced with
criticism, he should respond professionally instead of indulging in a personal attack.

The author is Principal & Dean at NUST School of Social Sciences & Humanities,
Islamabad. Email: akhan@s3h.nust.edu.pk