the export-import gap responds to real exchange rate depreciation and reflecting the need to further reduce the trade deficit after considering the net change in the balance of payments from changes in mining exports, FDI, mining profit remittances, UNMIL transfers, and other foreign aid (in the form of grants and concessional borrowing; cf. Tables A3.1, A3.2, and A3.4).<sup>8</sup> However, the slow growth in both imports and absorption is in part due to the rapid contraction of UNMIL transfers, imports, and consumption. Figure 2.3 shows that, among the items that make up absorption (the domestic final demand aggregates), the two largest components, household consumption and government consumption grow at a steady pace. The different investment flows and UNMIL consumption are smaller; the latter is projected to reach close to zero during the period up to 2017. In terms of indexed expansion (Figure 2.4), during the full period private investment other than mining grows most strongly followed by government consumption and household consumption; mining investment grows rapidly for a few years before shrinking to close to zero. The fact that UNMIL is able to exit without any major repercussions for the government and the households demonstrates its economic position as an enclave vis-à-vis the national economy.

In the background to the real macro aggregates shown in the preceding Figures, the model accounts for the evolution of the government budget and the balance of payments (see Tables A3.3 and A3.4). In the government budget, expressed relative to GDP, the major receipt changes over time are declines in the reliance on foreign transfers and increases in the reliance on direct taxes, although the latter increase is mainly due to the mining sector – in the model, its revenues are treated as direct taxes. On the spending side, the changes are more modest; the major change changes, which take place during the second period, are a decline for other, revealing a stronger emphasis on priority areas. The foreign government debt increases considerably during the AfT period but less so during the post-AfT period (staying at 25-30 percent of GDP during most of the simulation period; the increase in government domestic debt is more modest (Table A3.2). On the outflow side of the balance of payments (showing uses of foreign exchange), the main changes during the AfT period (2017 compared to 2012) are a strong decline in non-competitive imports (the heading under which most of UNMIL imports fall) and an increase in mining profit remittances. On the side of inflows (sources of foreign exchange), mining exports increase drastically whereas UNMIL and, to a lesser extent, government (non-UNMIL donor) transfers decline. During the post-AfT period, outflows related to various imports become more important where mining profit remittances shrink. Among the sources of foreign exchange, mining exports and FDI decline whereas agricultural and service exports expand strongly.

the real exchange rate), it may be misleading if one or both years is off the long-run trend, positively or negatively. With regard to investment, the capital stocks that are employed by the different sectors, determined by investment and depreciation, grow at rates that are very close to the rates of production growth; i.e. irrespective year-to-year variations, investment is sufficient to maintain required growth in the different capital stocks.

> 8 With regard to some of the accounting relationships that underpin Tables A3.1 and A3.2, recall that, by definition, the following holds: GNI = GDP + net factor income from abroad; GNDI = GNI + net current transfers from abroad; absorption = consumption + investment = GNDI + current account deficit of the balance of payments = GDP + imports - exports. For more on these relationships, see for example IMF (2007).

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