The Sunday Leader

Credibility Gap

Economic statistics are important to measure the progress of a country’s economy.
It provides useful data to policymakers, investors, acadaemia and the public alike, as to where the economy is heading and helps to guide the country’s monetary and fiscal policies.
Such information is particularly important to policymakers , by being a roadmap, showing the direction, the vehicle that is the economy is taking, so that if it has taken the wrong turn, remedial action could be taken to put it back on track, and if on the right road, probably to take measures to give it an additional thrust, so that growth may be more rapid, and incidence of poverty less and less.
In this backdrop, last week’s The Sunday Leader issue carried two articles about authorities here cooking up statistics in order to fool the public that the economy was doing well, when in fact the contrary may well have been taking place.
Two public officials who have been accused of this “fraud” are a highly placed Central Bank of Sri Lanka (C.B.S.L.) officer, while the other is a top Treasury official.
The first of these fraudulent activities dealt with inflation figures, by tampering with the items in the commodities basket, to show a lower inflationary regime, when in reality the opposite may have had been true; and the other, by at least attempting to tamper with the island’s growth figures in order to inflate such statistics, an action which led to the resignation of a C.B.S.L Assistant Governor who was heading the Bank’s Statistics Department at that time, whilst simultaneously C.B.S.L. stopping the dissemination of such growth figures, a practice that the Bank began after the economy was opened-up in 1977, thereby leaving the dissemination of such information to be the sole prerogative of the Department of Census and Statistics  only.
It also highlighted the resignation of an economist serving in the committee appointed to advise the Monetary Board, who accused a senior C.B.S.L. officer of cooking-up statistics and misleading the public, before throwing in the towel.
That outspoken economist, now retired from active service, also served in the C.B.S.L., before leaving the Bank for the U.N.
The tampering of inflationary figures, and, at least the attempted tampering of growth figures have all taken place under the tenure of President Mahinda Rajapaksa.
Inflationary figures have been doctored with by removing those items in the commodities basket whose prices have gone up by more than 5% in the last calendar month and by filling in the vacuum thus created with substitute items known as a trimming exercise.
Likewise, cigarettes and liquor, which were also included in the commodities basket as a measurement of inflation since the introduction of this index in the early 1950s have also been removed.
Those are two firsts, at least as far as the tinkering of the commodities basket is concerned, set up six decades ago, to measure inflation.
If these changes have not been made, inflation, in all probability would have had recorded double digit figures, and not the single digit numbers that is currently shown in official records.
Inflation is the measurement of the change of commodity prices. A higher inflation reflects an increase in prices.
High inflation is not good for the economy, because it’s the poor and the fixed income earner who end up being losers in such a regime.
Those adjustments, changes and the doctoring of figures have been made to show the public that the economy is doing well, and thus score politically, to the advantage of the present regime.
C.B.S.L. and The Treasury are the two institutions that have a hand in the country’s monetary and fiscal policies respectively.
But if these two institutions are intent on misleading the public by giving bogus statistics, or bullying those officers involved in the compilation of such data to throw up false figures, then, where are we, as a country heading to? Where then is good governance?
Such  lies and deceptions only enhances the credibility gap, and unless and otherwise the policymakers are also in the game, it may even lead to the misreading of the economy by the powers that be, resulting in a Marie Antoinette type of a utopia, lulling decision makers into a false sense of complacency, that all is well with the economy and the people of this island, by forgetting, or being misled by the fact that in reality Sri  Lanka may well be sitting on a time bomb, ready to explode at any moment, with dire consequences to the economy and to the island’s social fabric, because the truth had been hidden, and instead a Shangri la has been shown to the powers that be.

2 Comments for “Credibility Gap”

  1. Edward

    Is it wrong to live in a fool’s pradise? How to preserve the Democartic governent. At least wait till the elections are completed.

  2. very soon after the election is when the fun begins for the poor people of srilanka.may god help them as nobody in srilanka or outside will help.it is time to get the begging bowl proud srilankans.u are getting a dose of the same medicine u gave the tamils and muslin minorities.good luck

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