UPDATE 2-Ghana puts plans for mining windfall tax on hold – by Kwasi Kpodo (Reuters India – January 24, 2014)


ACCRA, Jan 24 (Reuters) – Ghana has put on hold plans to introduce a windfall tax on mining profits, Finance Minister Seth Terkper told Reuters, a move that will delight struggling gold firms but could undermine efforts to reduce the country’s budget deficit.

Ghana is Africa’s second-biggest gold producer and the precious metal is a large source of revenues for the country whose government is seeking to maintain rapid economic growth while reining in the deficit and inflation.

But the decision comes after President John Mahama said this week his country had come under pressure from the industry over the planned tax, with companies warning it would lead to job cuts due to a steep fall in gold prices.

“It’s on hold in parliament and we are consulting,” Terkper told Reuters late on Thursday.

Terkper had told parliament during the annual budget in November that the government would impose the tax, which it has been trying to push through since 2012. No timeframe was given at the time.

Ghana is viewed as one of Africa’s most dynamic countries because its stable democracy is coupled with robust economic growth led by exports of gold, oil and cocoa.

However, the planned tax highlights tensions between an industry feeling the pinch from a 28 percent fall in gold prices last year and a government facing pressure over a range of economic indicators.

These include inflation, which hit a fresh three-year high of 13.5 percent in December, and a budget deficit provisionally expected to land at 10.2 percent for 2013 as well as a weakening currency.

Analysts said pressure intensified this week because of an announcement that GDP growth in the third quarter of 2013 slowed sharply to 0.3 percent.

The slowdown is partly due to the mining slump and a reduction in oil output but it could also be because consumers are being squeezed by government efforts to rein in the deficit through measures such as cuts to utility and fuel subsidies.

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