receipts. Its revenue stems from this direct tax on mining capital value-added (VA, which equals the operating surplus of the sector, defined as gross sales revenue net of labor and intermediate input costs). The direct tax rate on mining capital VA changes over time on the basis of data on projected mining sector government revenue and mining capital VA. Other tax rates – direct taxes on households, and indirect taxes on market sales, activity gross revenues, and imports – are all based on the Social Accounting Matrix (SAM) but scaled so that the revenue level is similar to projections for 2012. Among non-tax receipts, both domestic transfers and domestic government borrowing are fixed as shares of GDP. Grant aid and (concessional) borrowing from abroad are both exogenous in real US dollars; their projections are based on the IMF.

On the spending side, the interest payments depend on the levels of the government foreign and domestic debt stocks (the evolution of which depends on net borrowing) as well as the levels of real interest rates, which are exogenous. Transfers to households are an exogenous share of GDP (like the transfer that goes in the opposite direction).

Government final demand (consumption and investment), disaggregated by function, are the only remaining spending items. It is assumed that, for each function, the government’s capital stocks and consumption grow in tandem – consumption depends on the level of the capital stock. Given this, an expansion of consumption (a measure of service provision) must be preceded, in one or more preceding years (the details depend on the gestation lags), by investments that sufficiently raise the level of the capital stock. This ensures that O&M costs are scaled up after the completion of roads and that additional teachers are not employed without already having a new school in place.

Each year, the government budget clears via adjustments in government consumption and investment spending. The real growth rates for the eight different government functions are defined in two steps. First, raw growth rates are defined exogenously for each function drawing on government spending plans, including stronger emphasis on infrastructure than other areas. However, unavoidably, these spending plans do not exactly match the fiscal space that is available given endogenous growth, price changes, and other assumptions that do not match what was known or assumed when these spending plans were conceived. Therefore, in a second step, MAMS in each year introduces endogenous uniform percentage point adjustments in the growth rates of each function that consider the available fiscal space.

In addition to payments involving the government (as payer or payee), the model covers payments from the rest of the world not destined for the government: FDI (split between mining and other private capital), and transfers from abroad to UNMIL and households – all of these payments are exogenous in US dollars. Mining FDI follows a time profile provided by separate mining analysis (IMF 2010). Other FDI and transfers to households grow gradually over time (at a rate similar to GDP). Transfers to UNMIL decline rapidly during the period up to 2017, after which they continue at a very low level.

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