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May 9, 2021

Calculating inflation figures: PBS rejects proposal for changing methodology

ISLAMABAD: The technical committee of the Pakistan Bureau of Statistics (PBS) has outrightly rejected any proposal for bringing changes in methodology for calculating inflation figures, arguing that any such change would distort the whole statistical series on prices.

The National Price Monitoring Committee (NPMC), under Chairmanship of Federal Minister for Finance Shaukat Tarin, had directed the PBS to include prices of commodities from Saasta Bazars/Sauhalat Bazaars and subsidy provided through Utility Stores Corporation (USC) of Pakistan. Through this exercise, the government wants to see reduced CPI inflation figures without focusing reduction in prices on the ground.

It was claimed by top government officials that one-third population was availing Saasta Bazars and other facilities provided by the federal and provincial governments so it should be reflected into price data collection. The government wants to expand cities from 17 to 34 for the purpose of collection of price data for the Sensitive Price Index (SPI). However, the technical committee, led by renowned economist Dr Asad Zaman, and comprising other experts, did not endorse the viewpoint of the Finance Ministry’s wizards and argued that the best international practices did not allow any changes into the methodology which would result into distorting the whole series of inflation figures.

The government had objected that there were 18 places in two major urban centers, including Karachi and Lahore, where the prices were collected by the PBS. There are 11 places in Karachi and seven in Lahore for collecting the price data.

During the maiden press briefing addressed by Federal Minister for Finance Shaukat Tarin, this correspondent asked what kind of changes in methodology was being asked by the government, that was largely perceived as part of tinkering process with inflation figures, Finance Minister Shaukat Tarin had replied that he was the one who had provided autonomy to the PBS and he was just asking the PBS to expand the coverage of price data collection from all available avenues. He stated that he would be the last person to tinker with the data.

The PBS had done rebasing of CPI-based inflation on the basis of family budget survey done in 2015-16 to gauge the consumption pattern of masses. Keeping in view the consumption, the weightage of different sectors was done on the basis of consumption pattern of families living in Pakistan. The rebasing was done on the basis of 2015-16 by replacing it from 2007-8. In the rebasing exercise, the number of cities were expanded from 37 to 47 while the number of commodities were increased from 347 to over 460.

The surge in inflationary pressure has become international phenomenon as it had gone up from 0.6 percent to 2 percent. The World Bank data showed that the commodities' prices in different parts of the world witnessed a surge by 30 percent. The USA witnessed surge in inflation because the Covid-19 pandemic disturbed the supply chain. With the provision of vaccine, there is an uptake in demand, so inflation is going up because of two factors, including increased demand and second low base effect in the same months of the last year.

When contacted the PBS high-ups were tight lipped and did not want to say anything on the record. One official said that the minutes of the technical committee were not yet finalised so they would not be able to talk of exact decisions without them. When the official spokesman of PBS was contacted for comments, he said that the PBS could conduct research to assess the impact of any designated intervention but it could not change the methodology because it could distort whole data collection series.