[R-G] IMF and WB Pressure Africa Finance Chiefs on China Funds

[Yoshie Furuhashi]

<http://www.reuters.com/article/latestCrisis/idUSL1330721>
Africa finance chiefs eye consensus on China funds
Fri Aug 1, 2008 6:39am EDT
By Daniel Magnowski and Vincent Fertey

NOUAKCHOTT, Aug 1 (Reuters) - African finance ministers and central
bankers met IMF and World Bank counterparts on Friday hoping to hammer
out guidelines on handling a tide of new investment into the
continent, much from resource-hungry China.

China, Brazil and India have been tying up infrastructure and loan
deals in Africa, often in return for oil, metals and other resources
they need to fuel their fast-growing economies.

Traditional lenders like the International Monetary Fund (IMF) and
World Bank worry African states now benefiting from debt relief may
run up new debt mountains they may find hard to sustain, especially if
a commodities boom runs out of steam.

"We decided to set aside a day to talk about non-traditional financing
sources, that is, China, India, Brazil and sovereign wealth funds, in
order to clarify the way the IMF and World Bank appreciate the
interests of these new sources of financing in Africa," said Ousmane
Kane, Mauritanian central bank governor and president of the African
Caucus of the IMF and World Bank.

The Caucus meeting in Mauritania, bringing together central bankers
and finance ministers from the poorest continent, will hold a session
to agree a common position on new investors, increasingly used as
alternatives to traditional lenders.

Besides loans, deals with China often involve Chinese workers building
roads and other infrastructure projects, while natural resources move
the other way, and the sums are awesome.

IMF officials say they must examine the debt implications of a $9
billion mining and infrastructure deal between China and Democratic
Republic of Congo before deciding if Congo will qualify for an IMF
programme and subsequent debt relief package.

Opposition politicians and anti-graft groups in Niger have criticised
the lack of transparency surrounding a deal between the government and
China's state oil company CNCP which could be worth $5 billion to one
of the poorest countries on earth.

RESPONDING TO AFRICA'S NEEDS

"The advantage of the new financiers is that they respond to a need
that Africa has, which is infrastructure, whereas traditional donors
focus on things like education," said a finance official at the
meeting who declined to be named.

"An issue to be discussed is the way these loans are backed by mines
and oilfields, which in the long-term is a big concern," he said.

Despite rising prices for many of Africa's commodity exports in recent
years, many economists worry countries which have benefited from huge
debt forgiveness packages risk plunging into a new round of
unsustainable borrowing from new lenders eager to secure access to oil
and minerals.

"A big concern is debt. Lots of debt has just been wiped out, and now
with China coming, are we going to see a new cycle? Prices of oil and
other resources are high at the moment, but if prices drop, African
countries will still have to pay interest on loans from China," the
delegate said.

African countries, rather than lenders, must be responsible for fully
assessing the future obligations to which they commit by accepting
loans from new sources, Mauritania's Kane said.

"We are for transparency ... The meeting aims to clarify the position
between traditional and non-traditional financing sources, but most
important is that Africa has to give its position to these
non-traditional sources, to tell them what they have to do for us," he
said.

The Chinese Developent Bank's presence at the IMF-World Bank meeting
demonstrated the sea change in African finance in recent years.

"Like it or not, China is a big part of Africa now," another delegate
said. (For full Reuters Africa coverage and to have your say on the
top issues, visit: africa.reuters.com) (Editing by Alistair Thomson
and Stephen Nisbet)