The International Monetary Fund (IMF) is handholding Statistics Botswana (SB) to develop a new price index that could be launched by September, initially focussing on mining and quarrying.
The planned Producer Price Index (PPI) would measure the average change over time in selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.
At present, inflation in Botswana is measured via the Consumer Price Index where the prices of goods and services also include taxes, transport and mark ups by businesses. By focussing strictly on the prices manufacturers receive for their goods and services, the PPI helps develop a more accurate picture of inflation for policymakers and other players looking at trends such as disposable incomes and the strength of the pula.
In a report seen by BusinessWeek on Wednesday, IMF officials said SB had already finalised the basket and weights for a mining and quarrying PPI. The mining and quarrying industry is dominated by diamond mining, which represents over 90% of all mining activity according to the 2017 weights, which were compiled using data from all Botswana mining establishments.
The dissemination of a PPI for mining and quarrying would provide a sound basis for the ongoing development of PPI’s covering of other important sectors of the economy, which would be aligned to the requirements of national accounts, IMF officials said.
A broader PPI would include sectors such as
“The previous (IMF) mission suggested indices for agriculture, utilities and manufacturing should be developed, which along with mining, would represent approximately 30% of the total GDP, based on the 2016 Botswana national accounts data.”
The PPI covering agriculture, for instance, is expected to work through the prices for crops provided by Botswana Agricultural Marketing Board and the prices of livestock provided by the Botswana Meat Commission.
For commodities such as poultry and eggs, the IMF has recommended that SB meet with industry players to develop adequate data.
Data from the horticultural sector is providing a challenge as the farmers who should provide the prices have reportedly not been responding to requests for updated information. The IMF, however, said the agricultural PPI could proceed without horticulture for now.
The PPI in September will be historic for Botswana.
“This will be the first dissemination of a PPI by SB, so they should initiate outreach activities with key data users such as national accounts and the central bank, to explain PPI concepts and methods. This will provide confidence that the price development for mining is in line with expectations,” IMF officials said.