June 2, (Reuters) - African governments have been adopting emergency measures to cushion the shock on their restive populations of soaring food and fuel prices. Experts warn the short-term steps being taken risk destabilising already stretched budgets. Here are some facts on how the fuel-food shock is straining Africa, the world's poorest continent. THE PROBLEM: Global prices for food, especially rice and other cereals, have soared in recent months, due to a "perfect storm" of factors. These include increased consumption in China and India, expensive oil which raises production and transport costs, and demand from biofuel producers. Supply disruptions caused by bad weather have also added pressure. The price of oil hit an all-time high of $135.09 a barrel on May 22, driven by rising flows of cash from investors and concerns that supplies will struggle to match demand. Although Africa exports both farm products and oil, many of its countries are net importers of food and fuel and are being badly squeezed by the double pincers of high prices for these. THE MEASURES: To ease the impact on consumers of rocketing prices, African governments have scrambled to introduce measures aimed at keeping down costs of essential food and fuel items. These include removing or reducing taxes, customs duties or VAT charged on food imports and sales, and also in some cases on farming and fishing activities. African countries which have taken such measures include Ghana, Senegal, Seychelles, Burkina Faso, Congo Republic, Mauritania, Gabon, Mali, Ivory Coast, Ethiopia and Guinea. In addition, many countries have sharply increased state subsidies for basic food staples and fuel products. Tunisia's government is raising subsidies on imported grain by 72 percent, to 413 million dinars ($355 million) in the 2008 budget from 240 million dinars in 2007. Morocco hiked subsidies on imported oil products, cooking oil and food cereals by 50 percent to about 30 billion dirhams ($4.1 billion) in the 2008 budget from 20 billion in 2007. Algeria has announced it plans to raise spending on subsidies of essential goods, such as powdered milk and soft and hard wheat, to 160 billion dinars ($2.5 billion) in 2008. THE IMPACT: Experts fear this combination of reduced state tax and customs revenues with sharply increased spending on subsidies will strangle the already stretched budgets of many African countries, especially the importers of food and fuel. For example, IMF officials see a "brutal" impact on Senegal's budget. They estimate government measures to counter the food and fuel price shocks have cost close to $400 million. They say that by straining the budget this way, the Senegalese government has stopped paying several hundred million dollars' worth of bills owed by the state to private sector suppliers. This could affect jobs and the wider economy. Ghana, Africa's No. 2 cocoa grower and the second largest gold producer on the continent, says its budget is also being "thrown out of gear" by the food and fuel price pressures. But its leaders say the economy has the resilience to withstand the shocks and extra costs, thanks to stabilisation of the cedi currency, an improvement in the level of reserves, the country's recognised creditworthiness and the prospect of oil production starting within two years. Niger, which is also battling a Tuareg insurgency in the north, recently announced it was expanding its 2008 budget by 78.3 billion CFA franc ($190 million), in part to cover costs relating to feeding its population and boosting farming. In neighbouring Mali too, officials report "tensions in the treasury", including delays in payments of suppliers' bills. THE RISKS: The double blow of higher food and fuel prices has swelled inflation in many African countries, alarming their governments and threatening to derail macro-economic targets. South Africa's targeted inflation rate jumped to 10.4 percent in April, a near 5-1/2-year high. Kenya's year-on-year inflation ballooned to 26.6 percent in April compared with an average 9.76 percent in 2007. Nigeria's consumer price inflation rose to 8.2 percent year-on-year in April from 7.8 percent in March. Ghana's annual inflation surged to 15.3 percent in April from 13.8 percent in March -- the sharpest rise this year. In response, the Bank of Ghana hiked its prime interest rate last month by a bigger-than-expected 175 basis points to 16 percent. Experts fear more governments will be forced to tighten monetary policy to counter inflationary pressure, which could slow economic activity and growth. Another risk comes from labour unions stepping up their demands for big public sector pension and salary increases to offset the rising cost of living. Unions have staged or threatened strikes in a number of countries, including Morocco, Mauritania, Burkina Faso and Guinea. If governments cave in to the salary increase demands, they risk fuelling inflation. If they resist, they risk social turmoil on the streets. (For full Reuters Africa coverage and to have your say on the top issues, visit: http://africa.reuters.com/) (Writing by Pascal Fletcher; Editing by Matthew Tostevin)
U.S. Navy Master-at-arms (MA) Kurtis Chapman (C) directs an unarmed combat self defence exercise with local sailors on Senegal's Naval base in Dakar, April 10, 2008. The United States is stepping ...
