devastating episodes are obvious reminders to consider natural resource management as paramount for sustainable development.<sup>6</sup>

**Table 1: Wealth Accounting, 2010 (% of GNI)**

||Ghana|Liberia|Sierra Leone|
|---|---|---|---|
|Gross National Savings (GNS)|18.8%|16.7%|7.3%|
|Consumption of Fixed Capital (CFC)|10.1%|9.7%|6.7%|
|Education Expenditure (EDU)|5.3%|3.1%|3.5%|
|Natural Resource Depletion (NRD)|7.7%|5.5%|2.1%|
|Inc. Mineral Depletion (MD)|6.3%|1.7%|0.6%|
|Environmental Degradation (ENV)|0.2%|1.2%|1.8%|
|Adjusted Net Savings(ANS)|6.1%|3.5%|0.2%|

Source: World Bank staff calculations.

Beyond the difficulty to project outputs, costs and prices, the computation of mineral depletion is subject to several additional complications. Two other factors, not taken here in consideration in the computation of Adjusted Net Savings, could further worsen the picture of likely negative adjusted net savings. First, in countries such as Ghana, Liberia and Sierra Leone, where population is growing fast, above 3 percent every year, per capita wealth grows more slowly (or declines more rapidly) than what the evolution of ANS suggests. Second, the possible environmental damages from greater mineral depletion are not here accounted for. Conversely, mineral wealth is not static, as determined by exploration activity and related discoveries. Thus new discoveries should be taken into account in the computation of mineral depletion, with the result of lowering the impact of extraction on mineral wealth. According to Gelb and al. (2012), world oil reserves before extraction grew by 41 percent (4.4 percent annually), gas reserves by 35 percent (3.8 percent annually), iron ore by 23 percent (2.6 percent annually), and gold by 56 percent (5.7 percent annually) between 2000 and 2008. Assuming that these trends would apply to Ghana, Liberia and Sierra Leone over the period 2012-15, mineral depletion would be 2.6 percent lower in Ghana by 2015, 0.3 percent lower in Liberia, and 3.2 percent lower in Sierra Leone than without any change in proven reserves as of late 2011. It would thus not fundamentally modify the picture. Much more significant would be the consideration of higher discount rates to compute mineral depletion.<sup>7</sup> At 10 percent (instead of 4 percent, reflecting higher social preference for the present), mineral depletion in 2015 would be 28 percent lower in Ghana, 40 percent lower in Liberia, and 28 percent lower in Sierra Leone.

In all likelihood, Liberia and Sierra Leone will not be able to capture all the rents in the years to come. As many countries, Liberia and Sierra Leone do not have the capital and technical expertise to extract alone mineral resources and thus need to attract foreign companies to do so. With perfect information and competition, foreign companies’ remunerations should match their exploration and production

> 6 See the World Development Report on Conflict, Security and Development (World Bank, 2011b), which highlights the high likelihood of conflict resumption in fragile states

> 7 Liberia and Sierra Leone’s population remain extremely poor (with GNI per capita respectively at US$200 and US$340 in 2010), with very low life expectancy (57 and 48 years old at birth respectively), and thus discount rates – preference for the present -rapid extraction and spending, likely to be very high. In recognition of the latter, the computation of mineral depletion across countries actually uses a 4 percent discount rate across countries to reflect some preference for the present, see Box 1.

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