Development narrative perhaps ended up as ‘delusion’

The narrative of economic development that the ousted Awami League (AL) government tried to establish perhaps ended up being a delusion even to the wirepullers, according to the white paper on the state of the economy.

The interim government, which took over in early August following the ouster of the Sheikh Hasina government, formed a 12-member team the same month to prepare the white paper, which was submitted to Chief Adviser Prof Muhammad Yunus on Sunday.

The AL came to power in 2009 and during its 15-year tenure, independent experts and economists repeatedly questioned the quality and reliability of public data.

The white paper panel, based on analysis and consultations with stakeholders, found discrepancies in data prepared by state agencies relating to gross domestic product (GDP), inflation, poverty, population, and agricultural production.

The panel cited discussions with relevant data professionals of the Bangladesh Bureau of Statistics (BBS) and other organisations, saying political policymakers took a special interest in GDP figures and "surely had a strong influence" during the post-2013 period.

The paper alleged that a collusive group within the BBS emerged to ensure the economic performance of the country was maintained against all odds, be it only on paper.

During the post-2019 period, this collusive group was largely maintaining the act.

"Data producers may have felt pressured to present an overly optimistic view of development, characterised by accelerated economic growth, especially since past estimates were repeatedly manipulated. Nevertheless, both data producers and users agreed that the urge to influence data on development indicators started from the GDP growth.

"It has been mentioned that the national accounts data releases for multiple years were subject to maintaining the level of satisfaction of key policymakers. To this end, in certain cases, past years' data for certain background data were also revised."

MYSTERY OF UNEXPLAINED GDP GROWTH

The panel said Bangladesh's GDP estimates have been under scrutiny for the past several years due to their apparent disjuncture with several other key macroeconomic and development indicators, including private sector credit growth, revenue mobilisation, import payments for capital machinery, energy consumption, export receipts and employment generation.

The white paper panel cited a World Bank (WB) study and said structural growth drivers such as trade, foreign direct investment (FDI), finance, macroeconomic stability and political stability could predict GDP growth reasonably well during the 1990s and 2000s.

However, the share of unexplained GDP growth started to increase in the 2010s.

This peaked in the 2015-2019 period, when 3.7 percentage points of growth could not be explained by the structural drivers, it added.

The report said the WB report terms this period as "rather unusual."

"Often, think-tanks in the country raised similar questions. Curiously, between FY14 and FY19, the GDP growth rate (calculated based on 2005-06 prices) never declined compared to the preceding year's estimates."

The panel used FY17 as an example, saying that the BBS reported 54.8 percent growth in leather and related industries although exports of the sector declined 16.3 percent that year.

In FY18, the same sector posted a 50.5 percent growth despite exports declining by more than a fifth.

"Pharmaceuticals also registered similarly unusually high growth rates. Likewise, the volatility of natural gas use for industry or the total is not reflected in value-added estimations for the industry sector. Indeed, about half of the GDP estimates are not based on credible real-time data."

For example, the value-added for private transport is calculated using the cumulative number of vehicles newly registered with the government authorities, namely the Bangladesh Road Transport Authority and the fixed value-added per vehicle.

This does not necessarily consider outdated transport, it said.

INFLATION ESTIMATES UNDER SCRUTINY

The panel also questioned inflation estimates by government agencies.

Citing a 2022 study by the South Asian Network on Economic Modeling (SANEM), the white paper mentions that while BBS recorded food inflation at 4.85 percent for urban areas and 5.94 percent for rural areas in January 2022, SANEM's estimates suggested that marginalised households faced inflation rates over twice those figures.

The white paper mentioned another research by the Bangladesh Institute of Development Studies, saying it found that food inflation in rural areas had hit 15 percent in December 2023 whereas national food inflation was reported at 9.58 percent by the BBS.

SHARP DECLINE IN POVERTY RAISED EYEBROWS

The white paper committee said the BBS estimated that poverty rates have been reducing since 2010, hitting 18.7 percent in 2022 from 26.5 percent in 2016. Similarly, extreme poverty rates have declined from 9.2 percent in 2016 to 5.6 percent in 2022, according to the statistical agency.

"However, these reductions do not align with improvements in other well-being indicators, such as food security," the paper added, citing the 2023 Food Security Statistics by the BBS that showed more than one-fifth of households perceived themselves as moderately to severely food insecure.

"According to the official data, the poverty reduction rate does not go in parallel with contemporary food insecurity statistics. The sharp decline in extreme poverty surely raised the eyebrows of analysts," the white paper said.

UNEMPLOYMENT DOWNPLAYED BY FOLLOWING DECADES-OLD STANDARDS

The panel also said that the BBS estimated a low unemployment rate by following an outdated methodology.

Citing the International Labour Organization (ILO), it said the UN agency prepares Bangladesh's key labour market indicators based on the 19th International Conference of Labour Statisticians (ICLS), published in 2013.

However, the BBS report used standards and definitions from the 13th ICLS, published in 1982.

"Furthermore, the BBS uses a different age range for youth and the working-age population than what is recognised by international standards. These discrepancies in standards and definitions have enabled the BBS to report an inflated employment rate for years, thereby downplaying the extent of the unemployment issue in the country," the panel said.

"The reliance on outdated standards distorts the actual representation of labour and employment conditions, affecting several key indicators, including the labour force participation rate, employment rate, unemployment rate, youth unemployment, youth not in employment, education or training, and informal employment."

The panel said a well-performing public data and information system is like oxygen for effective policymaking, saying: "Recognising that political influences and priorities often guide statistical manipulations is crucial."

Finally, it called for accurate data.

"This underscores the importance of accurate data as the backbone of effective policymaking. Manipulated data, on the other hand, can lead to devastating consequences, making the need for reliable data even more urgent."