Forex reserves were understated in Musharraf era

Figure fudging to hurt credibility of SBP, PBS; census figures to become dubious

ISLAMABAD: As controversy over the latest growth figures continues, Finance Ministry has disclosed that during Musharraf’s tenure, foreign exchange reserves were continuously ‘understated’ to the tune of $700 million by former economic adviser through the released Economic Surveys for several years from 2000 to 2007.

This discrepancy was removed with the approval of Federal Cabinet in 2008 when the Finance Ministry forwarded a formal summary and put it on the record that the foreign exchange reserves were understated by not including the reserves held by the commercial banks for several years, so this lacuna should be removed. 

When this correspondent contacted the former economic adviser of Finance Ministry Dr Ashfaque Hassan Khan on Sunday for seeking his views, he said that it was the domain of the State Bank of Pakistan (SBP) to give the data on foreign exchange reserves and it had nothing to do with the Economic Adviser Wing of Finance Ministry. Whatever number the SBP had given to us, they had published it in the Economic Survey during that period, he added. He also said that once he had talked about the foreign reserves and then governor SBP had called him and cautioned him that the finance ministry should not talk about reserves and exchange rate.

He said that there was a need to form a committee comprising those who use data of Pakistan Bureau of Statistics (PBS) such as the Ministry of Finance, Planning and State Bank of Pakistan officials as well as independent stakeholders as they could resolve this controversy amicably. Then the IMF or UN officials can validate this exercise to end this lingering controversy, he added.

When contacted, Federal Minister for Finance Ishaq Dar told The News that it was his idea to bring autonomy for data collection agency before the 1999 coup, which was implemented with the approval of parliament during the last PPP led regime. 

He said that there were systems and procedures which were followed in consultation with the federal and provincial departments to calculate the GDP growth figures every year. “It is unfortunate that some people maligned the country by raising a question mark on the authenticity of the data but the International Financial Institutions (IFIs) knew the ‘spin doctor’ who had already lost credibility,” he added.

Without naming anyone, he said that it was the same person who had consistently understated the country’s reserves for several years.  During the Musharraf/Aziz rule, the minister said that he had raised the issue of foreign exchange reserves’ position in the Upper House of Parliament but he was never answered during that time.

When he had assumed the charge of Finance Ministry for brief time along with PPP government in 2008 and was traveling to the US from Dubai, he had seen official files and was shocked to see that the foreign exchange reserves were understated by excluding the reserves held by the commercial banks. There were three headings for foreign exchange reserves as the reserves held by SBP, foreign exchange held by commercial banks and then total reserves of the country. 

The minister said that he directed his staff from Washington to seek details of foreign exchange reserves from the State Bank of Pakistan for the last several years and after his return, it was confirmed that the economic adviser wing of Finance Ministry did not insert reserves held by commercialbanks into the overall position of foreign reserves of the country for several years.

He said that he had summoned the then economic advisor to explain but he had admitted his mistake at that time. Then this matter was referred to Federal Cabinet to rectify the situation. The minister concluded that the same spin doctor had also damaged the country’s poverty figures in 2001 which were now rectified by their government after adopting new methodology.

However, putting controversy over figures aside as it should have mandate of experts to find out its permanent solution, there is one need of the hour that the PBS should be run on professional lines instead of handling matters by top gun like feudal mentality. Otherwise the government would have to face severe blows such as failure on holding population census well on time as well as authenticity of released figures.