# **Annex 1.  Summary of Baseline Assumptions**

## **A1.1 Macroeconomic Assumptions**

|Real mining GDP growth rate|See Text.<br>Diamond<br>rates of m|<br>price and prod<br>iningGDP.|uction volu|me are adjust|ed to be cons|istent with re|al growth|
|---|---|---|---|---|---|---|---|
|Real non-mining GDP growth rate|Derived f<br>provided|rom the real g<br>in revised ND|rowth rates o<br>P 10 Table 6|f non-mining<br>.1.|private sect|or and gover|nment|
|Real GDPgrowth rate|Derived f|rom real minin|gand non-m|iningGDPg|rowth rates.|||
|Nominal GDP|Derived f|rom realgrow|th rates and i|nflation. See|the table be|low||
|Inflation|Projection|s taken from I|MF Staff Re|port(July20|10)in CY co|nverted to F|Y.|
|Exchange rate|Projection|s taken from I|MF Staff Re|port(July20|10)in CY co|nverted to F|Y.|
|Nominal US interest rate|US long-t<br>converted|erm bond yeil<br>to FY.|d. Projectio|ns taken from|IMF WEO (|April 2010)|in CY|
|Nominal interest rate on new external<br>borrowing|Taken fro|m GDF (CY c|onverted to|FY). See tabl|e below.|||
|Nominal interest rate on domestic<br>government debt|Assume a<br>table belo|spread of 2 p<br>w.|ercentage po|ints over the|nominal dom|estic interest|rate. See|
|||**2010/11**|**2011/12**|**2012/13**|**2013/14**|**2014/15**|**2015/16**|
|Nominal GDP(millions of Pula)||101,252|113,053|127,640|141,971|155,234|167,868|
|Nominal miningGDP(millions of Pula)||35,841|40,689|45,334|49,241|52,631|55,420|
|Nominal Non-miningGDP(millions of|Pula)|65,411|72,365|82,306|92,730|102,604|112,447|
|Diamondproduction(in millions of cara|ts)|32.0|32.7|34.0|35.0|35.5|35.5|
|Nominal US interest rate(percentp.a.)||4.7|5.8|6.3|6.4|6.5|6.5|
|Nominal interest on new government ex<br>(percentp.a.)|ternal debt|1.4|2.5|4.1|4.2|4.5|4.5|
|Nominal interest on government domest<br>(percentp.a.)|ic debt|9.4|8.1|7.7|7.5|7.4|7.3|

## **A1.2 Fiscal Policy Assumptions**

**_<u>Revenue</u>_** Revenue policy No new revenue policy.  Revenue measures introduced in the 2010/11 Budget are assumed to remain the same.  Fees and charges are assumed to grow at the inflation rate (stable in real term). **_<u>Expenditure</u>_** Wage bill As per NDP10, it is assumed that there will be no net increase in established posts until 2015/16.   From 2016/17, the establishment is assumed to grow, in net terms, by 0.5 percent each year.  No cost of living adjustment in 2010/11 in line with the 2010/11 Budget.  Thereafter, wages will be adjusted annually at the inflation rate. Other recurrent spending Assumed to grow at the rate calculated from Table 6.6.  The 2010/11 figure is taken from the Budget (Table V). Development expenditure For 2010/11, the number is taken from the Budget table and thereafter it is assumed to grow at the rate calculated from NDP10 Table 6.7. On-lending No new on-lending. **_<u>Financing</u>_** External financing New external borrowing in 2010/11 as provided in the Budget table. The government is assumed to comply with the legal external debt and guarantee limit of 20 percent of GDP.  As external government debt and guarantees exceed the limit by end-2010/11, no new borrowing is assumed to take place until subsequent GDP growth and repayments provides room for additional external borrowing.  Until the debt and

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