webmaster
© Copyright DEHAI-Eritrea OnLine, 1993-2011
All rights reserved
From: Biniam Tekle (biniamt@dehai.org)
Date: Tue Apr 19 2011 - 08:34:57 EDT
http://news.yahoo.com/s/nm/20110417/wl_nm/us_imf_africa IMF cautions in
Africa vote-heavy year
By Lesley Wroughton Lesley Wroughton – Sun Apr 17, 7:53 pm ET
WASHINGTON (Reuters) – The International Monetary Fund is cautioning African
countries to watch their spending during a year packed with elections in the
region where rising food and fuel prices already pose a big threat to the
poor.
This year is the busiest for the African political calendar since the end of
the Cold War, with 17 presidential polls and even more parliamentary and
local elections.
The hectic schedule is raising concerns that countries could throw fiscal
caution aside to win votes and undermine years of economic progress, pumping
up growth and possibly raising wages that would further fuel inflationary
pressures.
"There are some hard decisions that governments will need to take this year
and those are even harder in a political season, but we want to encourage
countries to pursue reforms as much as they can," Antoinette Sayeh, IMF
director for Africa, told Reuters during weekend meetings of global finance
chiefs.
Djibouti, Chad, Seychelles, Cape Verde, Sao Tome and Principe, Uganda,
Benin, Niger and Central African Republic are among African countries going
to polls in 2011. Nigeria held a presidential election on Sunday.
In 2009, overspending by Ghana's former government in the run-up to
elections forced the West African state to turn to the IMF for a $1 billion
loan. Ghana faces presidential primaries in July before a vote in December
2012.
Pricier food is especially hard for Africa where many people spend most of
their disposable income on staples and any shortages worsens hunger and
malnutrition.
The World Bank says 44 million people have been pushed into extreme poverty
around the world since June 2010 when food prices started rising due to bad
weather and economic growth.
RESIST THE TEMPTATION
"It's important countries do as much as they can to protect the considerable
gains they've made and to really endeavor to rebuild some of the buffers and
to resist some of the clear political pressures and the temptation to expand
budgetary spending," said Sayeh, a former Liberian finance minister.
The IMF expects growth in Sub-Saharan Africa of about 5.5. percent in 2011,
more than double the rate of advanced economies. It would also be higher
than other developing regions such as the Middle East and North Africa,
Latin America, and Central and Eastern Europe.
Nigeria, Guinea, Angola, Sierra Leone, Sao Tome and Principe, Eritrea,
Ethiopia, and Democratic Republic of Congo face double-digit inflation this
year, according to the IMF.
Sayeh said if food and fuel prices remained at higher levels, they would
increase inflation pressures in many countries. Rising international prices
have, however, not yet made their way into all countries in Africa. Harvests
in some countries have been good enough to fend off the immediate impact of
higher international food prices, she said.
Sayeh said IMF data and analysis from the last food price crisis three years
ago suggests it can take about six months before higher international prices
push up domestic inflation.
"Our sense is that we may see further additional inflationary pressures
manifesting themselves come this summer in some countries," Sayeh cautioned.
Higher oil prices have a major impact on poor nations because of their
bearing on the cost of fertilizers and transporting produce to markets.
"We think it will be a significant shock for a number of countries, so a lot
of the discussion we will have with our African member countries over the
next few days is around these developments," Sayeh said.
To mitigate the impact of higher prices, governments should look if there is
room for maneuver in their budgets to target assistance to the poorest
households, she said, adding this was sometimes difficult because many
countries lacked information or data to identify the very poor.
The second-best option for those countries, she added, was to lower taxes on
food commodities, although she warned this was costly and would include
households who do not necessarily need the help. She said governments should
avoid generalized subsidies that cause harmful distortions in food markets
----[This List to be used for Eritrea Related News Only]----