Friday, 4 March 2005


The Malta Independent - Friday Wisdom

Credit is due to the National Statistics Office (NSO) as the national organisation charged with collecting, processing and publishing statistics which enable us to keep track of all aspects of the Maltese way of life, be it economic, social or demographic.

Their output has become more useful and reliable in that it is issued with impressive timeliness, it is well explained and has been expanded both in quality and frequency. Their up-dated website is user-friendly and easy to navigate. Moreover, their archives are a much useful tool, saving time and energy to researchers who need to dig up old data.

Even their direct one-to-one service is commendable. Whenever I needed an explanation or an elaboration on some point in their publications, I normally get an e-mail which is to the point within 24 hours.

Over the last few years the NSO updated their methodologies so as to come in line with Eurostat standards. All this was done with minimum fuss and a very impressive yet down to business approach.

It is important to appreciate that NSO publishes strictly historical data and their duty is to report factual information as emerging from their consistent approach in processing raw data obtained from different sources in society. One of the major sources is of course the government itself and in so far as public finances are concerned the government, basically, is the sole or main source of such data.

Consequently NSO cannot prevent government manipulation of data, on the part of the government, aimed to make the end result artificially fit pre-set objectives. And this, I suspect, is happening every December, when the government has to close its books in order to shape the annual deficit in line with what was announced in the budget a few weeks earlier, generally in the latter half of November.

Take a case in point. NSO’s improved service is now giving us monthly results of the government finance record even in the first few months of the year. Until a few years back this was not so since we, generally, would have got the results for the first three or four months of the year grouped together somewhere in April or May.

The release of such statistics was purposely delayed until the government had crystallised its financial position as at the previous year-end and such final outturn for the previous year got published before interim results for the current year.

Thanks to NSO this is no longer so. We now have the January 2005 figures for public finance that were published on 22 February even though the final result for 2004 is not yet there.

What is striking about the January figures is that there is a marginal 5.4 per cent drop in revenue over January of last year but a stark 24 per cent increase in expenditure over the same month last year resulting in doubling of the deficit for the month from Lm19 million to Lm38 million.

While interpreting a single set of figures for one solitary month has its obvious limitations which defeats the scope for drawing any firm conclusions, one cannot but raise an eyebrow at the size of the swings and suspect that there has been purposeful manipulation of data shifting transactions from December to January in order to massage the figures for the last financial year to fit whatever was planned before.

While the drop in revenue could be explained by a four million reduction in profits received by the government from the Central Bank, the rise in expenditure is much less transparent. Capital expenditure for the month was relatively stable and public debt servicing was slightly lower than last year.

This means that all the jump in expenditure, 17 million of it, is in recurrent expenditure which given its nature should normally show more features of stability.

The conclusion is obvious that recurrent expenditure has been manipulated to cross the dividing calendar line to massage the year-end financial figures to government’s wishes, making in the process a mockery of our national statistical service.

Lest you should think that this is the work of a dirty mind and has never happened before, let me reproduce an extract from the Auditor General Report for Public Accounts 2003 pages 16 and 17:

“Warrant No. 3 was issued by the Minister of Finance on 8 January 2003 for an amount not exceeding Lm8,500,000 in order to process and effect payments during 2003 related to various Votes of expenditure until the corresponding Vote of expenditure in the Consolidated fund is identified”.

It results that, “vouchers amounting to Lm8.5 million raised by Ministries/Departments and forwarded to the Treasury Department during December 2002 were authorised for payment in January 2003 and therefore accounted for in the financial year 2003 (with) Treasury acting upon instructions from the Ministry of Finance”.

The good work of the NSO can only be enjoyed by the consumer of statistical information if the input data stops being manipulated by the government.

High time for the government to move to accrual accounting where income and expenditure start being recognised at the point they occur or incur rather than at the point of the actual cash execution of the transaction which is conveniently subject to calendar manipulation.

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