The government, on Monday, approved a new inflation rebasing mechanism for mapping the consumption of arrival of new products in the urban and rural areas of the country.
This has been delayed for over one year and it could ensure the renewal of the list containing obsolete items and proper rural-urban representation.
The decision was taken during the 17th meeting of the governing council of Pakistan Bureau of Statistics (PBS), presided over by the Minister for Planning, Development and Reform Makhdum Khusro Bakhtyar. The new base will be published after approval by the Economic Coordination Committee.
The rebasing was scheduled to be held in June 2017; however, the previous government gave one year’s grace period till June 2018 to complete the process due to the population census.
This approval came about a week after the government complained to the PBS about its methodology when March’s inflation data showed a 9.4% rise, the largest in five years.
Currently, the PBS measures prices of 487 items collected from 76 markets in 40 cities across Pakistan, representing only the urban consumption basket at the exclusion of the 62 percent of rural households.
Each of the items is assigned a certain “weight” in the overall basket, and the Consumer Price Index (CPI) is then calculated by taking the change in the price of that item from the base year and applying the “weight”.
The CPI is widely used for making policy and investment decisions and can impact the course of interest rates as well as the future of cost of long-term investments.
According to the official announcement released after the meeting, “the Minister for Planning Khusro Bakhtyar emphasized the need for authentic data collection for better policy and decision making.”
PBS approved the changes to the base year as well as the relative weightages assigned to various items in the basket.
The council approved the proposal of rebasing the consumer price index (CPI) to FY-2015/16 from FY-2007/8. Officials present at the meeting confirmed that the relative weightages of the items in the CPI basket has also been changed, but would not share details. The decision now has to be approved by the Economic Coordination Committee.
The rebasing was long overdue and the exercise was completed in December 2017 and a technical committee cleared it for presentation in the council. Under the new base, PBS will compile an urban consumer price index, a rural consumer price index and a national consumer price index on a monthly basis.
The meeting was apprised that the fifth meeting of the governing council of PBS has decided to rebase the national accounts committee and price statistics after every 10 years.
Subsequently, a technical committee was constituted under the chairmanship of ex-vice chancellor, Pakistan Institute of Development Economics, Dr. Asad Zaman, which recommended changing the base.
The decision comes on the heels of shifting the PBS into the domain of ministry of planning.