Abstract:
This article critiques the current and proposed treatment of mineral resource extraction in government finance statistics and national accounts. Mineral endowments are a shared inheritance, often held in trust for present and future generations. Current standards misclassify mineral sale proceeds as revenue rather than capital receipts, distorting public sector sustainability metrics. This creates perverse incentives for unsustainable resource exploitation while hiding significant public wealth losses. The draft SNA 2025, which includes the split asset approach, remains inadequate. Case studies from Goa, Canada, and Australia highlight these deficiencies. We propose an alternative framework that avoids premature mineral asset recognition, classifies mineral sale proceeds as capital receipts, records extraction losses as expenses, and uses Net National Income as a target metric. The proposed reforms would promote fiscal sustainability and intergenerational equity in mineral resource management, better reflecting the economic reality of mineral extraction's impact on public sector net worth and national wealth.
