growth for exports and slow growth for imports) is needed to close the balance of payments deficit that is caused by the decline in transfers to UNMIL. However, this takes place without any significant adjustment difficulty since UNMIL itself used most of its transfers to pay for imports. By contrast, during the post-MTGDS period, growth rates are considerably more uniform across the different macro indicators. Government spending shifts from investment toward consumption given slower expansion and the need to operate and maintain a much larger capital stock. Steady household consumption growth throughout both period results in a steady decline in the poverty rate. The analysis assumed unchanged inequality (measured by the Gini coefficient). As shown in Figure A1.7, if Liberia’s Gini coefficient were to decrease from its current level (52.6) to the worldwide average (40.9), progress on poverty reduction would be considerably stronger. For the other MDG indicators, progress on an annual basis is stronger during the MTGDS period, reflecting the role of government in human development and infrastructure services.

Table 3.2 shows a similar set of indicators expressed as shares of GDP (in 2012 and at the end of, and on average for, each of the two periods, MTGDS and post-MTGDS). The most striking change (echoing the comments on Table 3.1) is the drastic decline in the trade deficit (also reflected in the decline in absorption relative to GDP). The gap between gross national and gross domestic savings shrinks due to the related decline in Liberia’s surplus for non-trade items (the sum of net factor income and net current transfers) on the current account of the balance of payments.<sup>14</sup> The foreign debt of the government is more than doubled as a share of GDP from 9 percent to 21 percent while its domestic debt is roughly unchanged.

In the government budget, expressed relative to GDP, the major receipt changes during the MTGDS period are less reliant on foreign transfers and more reliant on direct taxes, although the latter increase is mainly due to the mining sector. This trend continues during the postMTGDS period for foreign transfers but is reversed for direct taxes (due to the decline in the importance of the mining sector). On the spending side, the major change is an expansion in total government (current and capital) spending on energy and, to a lesser extent, roads. Government education and health, at 4.5 and 4.0 percent of GDP in 2030, are above the recent averages for low- and middle-income countries (WDI, 2011).<sup>15</sup> The mining expansion drastically increases the share of mining in GDP during the MTGDS period, while the shares of other private sectors decline and those of government services increase marginally (Tables 3.5 and 3.6). During the post-MTGDS period, these changes

> 14  Gross domestic savings equals gross national savings minus the sum of net factor incomes and net current transfers from abroad.

> 15  For example, according to the most recent WDI numbers, average public spending on education was around 3.7 percent of GDP for low-income countries, and 4.0 percent for middle-income countries (data for 2007).  For health, the corresponding figures were 2.2 and 2.9 percent of GDP, respectively (data for 2009).

9