(Adds details, quotes on South Africa from paragraph 12)By Lesley WroughtonWASHINGTON, Oct 10 (Reuters) - African economies have so far been only indirectly hit by global market turmoil but tighter credit markets may impact funding for projects, even profitable ones, the International Monetary Fund said on Friday."The main effects of the global financial turmoil appear to be indirect in the form of slower global growth and volatile commodity prices," the IMF's new Director for Africa, Antoinette Sayeh, told reporters ahead of meetings of world finance ministers in Washington."However, clearly, the recent hike in turbulence raises the risks, including on the declining resources flows to Africa in the form of private capital, remittances and even aid," she added.Costlier food and fuel posed challenges for Sub-Saharan Africa, especially its poor, and have put upward pressure on inflation and current account deficits, Sayeh said. Donor aid, however, has not increased to cover the larger import bills for food and fuel further squeezing budgets of some African governments.She said Africa's remarkable growth in recent years is being tested by the global crisis, and more than ever governments need to safeguard economic stability.She said the IMF worried that the crisis will slow project funding to Africa, much of it from Wall Street and other banks at the center of the financial storm."It will certainly be more challenging for profitable projects even to receive funding in Africa, and with declines in commodity prices, those projects, of course, look less profitable than they would have otherwise, so that is certainly a concern of ours," Sayeh added.WAITING GAMEMark Plant, deputy director of the IMF Africa Department, said it was hard to know exactly how the global crisis will unfold in Africa. Investments in Africa tend to be longer term so the types of turmoil in the market will not immediate impact the region. "It's a bit of a waiting game," Plant said, "Where the impact will come is down the road when people start to make longer term investment decisions and seeing the impacts of the current crisis on commodity prices on growth in general." He said current global conditions required African leaders to be vigilant and "keep their eyes on the medium term, but realizing that waves that are being generated by this current crisis may wash up on African shores in the next six to eight months."SOUTH AFRICA PRESSURESTurning to South Africa, Saul Lizondo, deputy director in the IMF African Department, welcomed a decision on Thursday by its central bank to keep interest rates on hold. "We think that was the right decision," he said.He said there were several factors that could help lower high inflation in South Africa, including a slowing economic growth and cooling domestic demand. In addition, a decline in world oil prices, if it were to be sustained, would also help reduce inflation, he added."On the other hand, inflation expectations are high, wages are growing rapidly, core inflation is also high, and the depreciation of the rand again, if sustained, is also going to push inflation up," Lizondo said."So we think that for the moment, on balance, keeping the interest rate at 12 percent was the right decision," he added. Private capital inflows and portfolio inflows have helped finance South Africa's current account deficit. Lizondo said there would have to be an adjustment in the economy, vis-a-vis its currency reserves, if there were capital outflows.The IMF is forecasting some easing in South Africa's economic growth to around 3.5 percent next year from 5 percent in 2007, but the fund would have to adjust the forecast if there were capital outflows, he added.(Reporting by Lesley Wroughton. Editing by Chizu Nomiyama)
A farm worker is seen at a farm in Eikeihof outside Johannesburg September 30, 2008. For those seeking to redistribute South Africa's rich, sprawling farmland among landless, poor blacks, there is ...
