05-10-04

South African Finance Minister Trevor Manuel said discussion was needed among African countries on how to deal with higher oil prices that could trigger fiscal problems for some governments.

Manuel, who chairs the World Bank's policy-setting committee of 184 countries, said many African oil producing countries were unprepared for the windfalls of higher oil prices.

Manuel also said there was a danger on the continent of "Dutch disease" -- when the discovery and exploitation of natural resources leads to currency disruptions, increased imports, decreased exports, and productivity falls.

The phenomenon was first observed in The Netherlands in the 1960s, when large natural gas reserves were first exploited.

Manuel said costlier oil could lead to inflationary pressures on the continent, a warning the IMF made in its World Economic Outlook, issued earlier. Although Manuel did not mention his country, IMF officials cautioned that mild inflationary pressures may be in the pipeline for South Africa due to domestic demand and rising oil prices.

"On the African continent, we are facing some difficulty and there is a need to be in discussion about it, but the problem is that no one has the answers relating to how long prices will be at these levels," he said.

Manuel's concerns about oil prices, which rose above $ 50 a barrel, comes as the IMF foresees a rise in growth in sub-Saharan Africa to 4,75 % in 2004 and 5,75 % next year.

The bulk of that growth would come from large increases in oil output in countries like Angola, Chad and Equatorial Guinea.

Source: The MarketPlace