Sri Lanka Can Improve Data-IMF

dollarsGross domestic product calculations to be more in line with international standards and the country does not yet comply with the highest data dissemination standards, the International Monetary Fund has said.
“The national accounts suffer from insufficient data sources and undeveloped statistical techniques,” an IMF country report following so-called Article IV consultations on Sri Lanka said.”The country does not have periodic comprehensive benchmarks or a system of regular annual surveys of establishments. A statistical business register, which would serve as the main basis for conducting sample surveys, is not available.

“As a result, the few surveys that are conducted do not have good sample frames.”

But most the underlying data are timely, the report said.

“However, detailed data needed to measured both output and intermediate consumption are mostly unavailable or not collected,” the report cautioned.

“As a result, the estimates of gross value added are prepared directly relying on outdated fixed ratios established from the base year 1996, often with outdated studies or ad hoc assumptions.

“Quarterly indicators are used for compiling quarterly value-added estimates.

“The methodology for deriving GDP at constant prices is not satisfactory. Expenditure estimates are available only annually and rely mostly on commodity flow techniques.”

 

Sri Lanka’s most widely watched Colombo Consumer Price Index could also be improved to cover the entire island and the IMF had suggested ways to overcome “missing prices”.There have been concerns raised about the absence of alcohol and cigarettes by statisticians and other analysts. Sri Lanka suddenly stopped an all island index when inflation started to shoot up over 30 percent during 2007.

But critics say most countries try to understate inflation and Sri Lanka may be doing it less than some advanced nations, who use very sophisticated mathematical methods to understate inflation and smoothen spiking prices found in the real world.

The IMF said fiscal statistics could also be improved and there would be technical missions in 2013 and 2014 to help.

Monetary and balance of payments data could also be improved particularly in relation to treating foreign currency deposits, the report said.

Sri Lanka has been a participant of IMF’s General Data Dissemination System (GDDS) since July 2000.

“In February 2003, the authorities appointed a coordinator with the objective of subscribing to the Special Data Dissemination Standard (SDDS),” the report said.

“Work is in progress toward meeting all SDDS requirements.”

IMF’s resident representative Koshy Mathai told reporters earlier this month that the website of Sri Lanka’s central bank was one of the most informative, according to feedback he has received.

As a person living in Colombo, he said the price index did not appear to be very far off reality.

Critics of GDP have said such aggregates are largely meaningless for many reasons including counting wasteful state spending as value added, ignoring non-monetary transactions, the black economy, depreciation and counting the cost battling state regulations as consumption.

When autarkists chasing ‘self-sufficiency’ push up food prices through price support schemes, GDP and per capita GDP can go up, but people can go hungry and their children can suffer malnutrition.

There are also more fundamental arguments against using prices – exchange rates of various goods and services among people – to measure an aggregate of output over time.

“The attempt to determine in money the wealth of a nation or the whole mankind are as childish as the mystic efforts to solve the riddles of the universe by worrying about the dimension of the pyramid of Cheops,” economist Ludwig von Mises wrote in Human Action.

“The money equivalents as used in acting and in economic calculation are money prices, i.e., exchange ratios between money and other goods and services.

“The prices are not measured in money; they consist in money. Prices are either prices of the past or expected prices of the future. A price is necessarily a historical fact either of the past or of the future.

“There is nothing in prices which permits one to liken them to the measurement of physical and chemical phenomena.”

Due to the obsession with growth numbers that began in the last century due to ‘macro-economics’ politicians and state interventionists are now pushed into ‘stimulus’ and other measures to show ‘growth’.

The way GDP is measured to show ‘growth’ from wasteful state spending and understating inflation generates a natural bias for interventionists to spend or print money or both to generate bigger numbers and generate economic instability as a consequence.

If bigger GDP numbers can be generated statistically in the first instance instead of through dangerous manipulations of money supply and budgets, critics say the problem can be solved before it starts.(LBO)

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