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IMF bid to help Africans on inflation

WASHINGTON: The International Monetary Fund is in talks with 10 mostly African countries over a possible increase in financial support to help deal with balance-of-payments and fiscal problems caused by high food prices.

Masood Ahmed, the IMF’s chief spokesman, told the Financial Times that the countries involved had approached the fund to see if it would be willing to step up its support through the existing poverty-reduction and growth facility.

He said the IMF had not made any financial commitments yet, but was reviewing the requests as a matter of urgency. “This is something we would aim to do relatively quickly,” he said.

The fund was also discussing with a wider set of countries changes to fiscal frameworks that might be necessary to accommodate the food crisis, Mr Ahmed said.

In some cases, it would recommend cutting other spending to make room for greater targeted support for people unable to afford food, but in others it would be willing to see higher budget deficits, he said.

News of the talks follows warnings by Dominique Strauss-Kahn, the IMF’s managing director, in the FT that the food price surge threatened to cause an economic as well as humanitarian crisis in parts of the developing world.

Mr Ahmed said an increase in support through the IMF’s existing channel would be “the fastest way for them to get increased funds to cover the increased cost of food”.

Mali, Cameroon and Madagascar are among the 10 countries in talks. He said the rise in food prices was equivalent to a negative terms-of-trade shock of more than one percentage point of gross domestic product in some of these countries. “There is a balance-of-payments dimension to this crisis as well,” he said. “In a number of cases the terms-of-trade effect on the balance of payments is more than 1 per cent of GDP from food alone.” And many of these countries were also affected by higher oil prices.

Some non-oil producers in Africa had a partial offset from high prices for other commodities they exported, he said. But food prices had shot up recently, while oil had moved higher. daily times monitor

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