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By Phumza Macanda
PRETORIA, May 16 (Reuters) - The International Monetary Fund said on Friday higher food prices could lead to further social unrest in sub-Saharan Africa and it warned the region against using subsidies and price controls to tackle higher food prices.
"Countries may face social unrest because of rising food prices... A significant amount of household income is spent on food," the fund's acting director for Africa, Benedicte Vibe Christensen, told a meeting to present the IMF's regional economic outlook.
"We would advise governments to use a more targeted approach and not subsidies or direct price controls," she said, adding that temporary subsidies could help the most vulnerable.
Labour unions in South Africa have warned of protests similar to those in other African and Asian countries against rising prices, and have demanded government intervention.
The ruling ANC and its allies called for more subsidies for the poor to help alleviate hunger.
Some South Africans have directed their anger about the difficult living conditions at foreigners, accusing them of taking their jobs and accepting lower salaries.
Two people have been killed and more than four dozen others injured since the rampages began last Sunday in Alexandra township in Johannesburg. Most of the violence has targeted Zimbabweans, Mozambicans and other immigrants.
The IMF said sub-Saharan Africa should register economic growth of 6.5 percent this year after 6.6 percent in 2007 while the region's inflation rate should come in at 8.5 percent, excluding Zimbabwe's more than 160,000 percent annual inflation.
The IMF said the impact of higher oil prices in the region could cut the gross domestic product (GDP) expectations by 0.2 to 0.9 percent and more in energy-intensive countries such as South Africa.
TIGHTENING NECESSARY
The IMF said monetary tightening might be necessary when price pressures spread beyond food and oil.
"Higher oil and food prices have built some pressures into the economies, including South Africa. In that case it is necessary to step on brakes," Christensen said.
On Tuesday the Reserve Bank said in a bi-annual monetary policy review that the regional economic outlook remained positive, but that tensions over neighbouring Zimbabwe's disputed presidential election posed a downside risk.
The IMF official would however not comment on Zimbabwe or whether South Africa's inflation targeting policy was appropriate.
The central bank is also worried about spiralling inflation in South Africa, and has strongly hinted at further monetary tightening in a bid to bring the main CPIX consumer gauge back down to within a 3-6 percent target range.
The targeted CPIX inflation gauge has persisted above the top end of the target range since April 2007, and jumped to a new five-year high of 10.1 percent year-on-year in March.
The central bank lifted its repo rate by 50 basis points last month to 11.5 percent, adding to 400 basis points worth of increases since June 2006 to try to tame inflation. (Reporting by Phumza Macanda; editing by editing by David Christian-Edwards) ((stella.mapenzauswa@thomsonreuters.com; +27 11 775 3161; Reuters Messaging: stella.mapenzauswa.reuters.com@reuters.net))
Keywords: AFRICA IMF/
PRETORIA, May 16 (Reuters) - Sub-Saharan Africa is expected to register economic growth of 6.5 percent this year while the region's inflation rate should come in at 8.5 percent, a senior International Monetary Fund official said on Friday.
"Sub-Sahara Africa continues to grow at robust rates and in 2008 we expect it to grow at 6.5 percent and inflation to be at 8.5 percent," said Benedicte Vibe Christensen, acting director of the African Department at the Fund. (Reporting by Phumza Macanda) ((stella.mapenzauswa@thomsonreuters.com; +27 11 775 3161; Reuters Messaging: stella.mapenzauswa.reuters.com@reuters.net))
Keywords: AFRICA IMF/
ANKARA, May 16 (Reuters) - Turkey's 2008 budget deficit will be a "few billion" lira below an 18 billion lira target ($14.5 billion), Finance Minister Kemal Unakitan told Reuters, adding that fiscal discipline and reforms would continue with or without the IMF.
Turkey's International Monetary Fund loan programme expired on May 10, and the government has yet to say what kind of follow-up programme will succeed it.
"With or without the IMF Turkey will continue fiscal discipline and structural reforms with the same determination. No one should have any doubts about this," he said in an interview late on Thursday.
"Turkey has the anchor of the European Union. We have announced the Medium-term Economic Framework and that is also an anchor," he said.
He also said that the government planned to further privatise lender Halkbank <HALKB.IS> this year, and was considering a secondary offering. ((Reporting by Orhan Coskun) ((emma.ross-thomas@reuters.com; +90 212 350 7062; Reuters messaging: emma.ross-thomas.reuters.com@reuters.net))
Keywords: TURKEY ECONOMY/UNAKITAN
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By Yoo Choonsik
SEOUL, May 16 (Reuters) - The Bank of Korea needs to keep focusing its policy on containing inflation pressures even if the current price growth is mainly driven by cost factors, an International Monetary Fund official told Reuters on Friday.
The remark adds weight to central bank in its tussle with the finance ministry officials who argue that cost-push inflation is beyond South Korea's control, and that therefore the bank should lower interest rates to boost economic growth.
"The Bank of Korea has been independent for almost a decade now and its primary purpose is to ensure price stability," Meral Karasulu, the IMF's resident representative in Seoul, said in an interview. "I have no reason to think it should change."
On May 8, the Bank of Korea held interest rates steady for a ninth consecutive month, while warnings by its chief about inflation staying above its target rates for months sent bond prices plunging, reducing chances for a rate cut soon.
"(Indicators) point to second-round effects of those first-line cost push inflation (pressures). So vigilance on that front is certainly called for to make sure that inflation expectations remain anchored and they do not get out of hand."
Central bank data showed on Friday import prices in won <KRW=> terms recorded the fastest annual growth in almost a decade, a week after figures showed April's annual producer inflation also spiked to an almost decade high.
Annual consumer inflation in April hit a four-year high of 4.1 percent, marking the fifth month in a row that the rate stood above the central bank's target of keeping inflation at between 2.5 percent and 3.5 percent on average for 2007-2009.
STRUCTURAL REFORMS
Karasulu also said she was not concerned very much about South Korea's expected current account deficit for this year, which would be the first shortfall in 11 years.
"Especially this year, with high commodities prices and higher import bills, and a decline in export demand, this was in a sense quite obviously expected," she said.
Finance Minister Kang Man-soo told reporters early this month that he was seriously concerned about the current account deficit, a remark that currency traders in Seoul have taken as suggesting he prefers a weaker won.
The finance ministry forecast last month South Korea would post its first current account deficit in 11 years of up to $10 billion this year, compared to a $6 billion surplus in 2007.
The won has lost more than 10 percent against the dollar so far this year and by some 16 percent against the yen <JPYKRW=R> on increased demand for dollars from importers and on speculation the government wants to hold the won down to help exporters.
Karasulu said South Korea should try to improve the current account balance through structural reforms aimed at improving productivity in the service sector rather than using foreign exchange policy.
"When you look at the export performance of Korea over the last few years, it has been quite strong. This was achieved despite a much stronger won over the last few years," she said.
"Service sector productivity is almost half that is in manufacturing. It is way (below) the OECD average. Our policy recommendations have been deregulation of business practices, more flexible labour markets and bringing in more competition into the service sector," she added. (Editing by Keiron Henderson) ((choonsik.yoo@reuters.com; +82 2 3704 5580; Reuters Messaging: choonsik.yoo.reuters.com@reuters.net))
Keywords: KOREA ECONOMY/INFLATION
SEOUL, May 16 (Reuters) - The Bank of Korea needs to keep focusing its policy on containing inflation pressures even if the current price growth is mainly driven by cost factors, an International Monetary Fund official told Reuters on Friday.
The remark contrasts with the stance of South Korean finance ministry officials who argue that the cost-push inflation is beyond South Korea's control, and that therefore the central bank should lower interest rates to boost economic growth.
"The Bank of Korea has been independent for almost a decade now and its primary purpose is to ensure price stability," Meral Karasulu, the IMF's resident representative in Seoul, said in an interview.
"I have no reason to think it should change," she added.
"(Indicators) point to second-round effects of those first-line cost push inflation (pressures). So vigilance on that front is certainly called for to make sure that inflation expectations remain anchored and they do not get out of hand." (Reporting by Yoo Choonsik,; Editing by Keiron Henderson) ((choonsik.yoo@reuters.com; +82 2 3704 5580; Reuters Messaging: choonsik.yoo.reuters.com@reuters.net)) Keywords: KOREA ECONOMY/INFLATION
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