Paulson may get African heat on dollar policy

By Glenn Somerville

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson heads to Africa this week to spotlight countries the Bush administration sees following sound economic practices but may find heat reflected back over U.S. currency policy.

The U.S. Treasury chief leaves Washington on Tuesday afternoon against a backdrop of mounting global concern over the dollar's plummeting value that has Paulson on the defensive over the greenback's status as the world's reserve currency.

Paulson, who arrives in Tanzania late on Wednesday and will move on to a weekend meeting of Group of 20 finance officials in South Africa, said last Friday the U.S. economy's strength will "shine through" current market turmoil eventually.

While those clouds roil, though, fellow finance chiefs indicate they will give Paulson an earful about the impact on their economies from the dollar's long slide that pushes up the relative value of their currencies and dampens exports.

CURRENCY ON THE BURNER

"I think that meeting will be quite important as an opportunity for the G20 countries to talk about this issue of weakness in the American currency, which is really the primary issue," Canadian Finance Minister Jim Flaherty said last week.

Paulson's visit takes him to Ghana when the G20 session concludes on Sunday for meetings on Monday with business and government representatives before returning to Washington.

U.S. Treasury officials briefed reporters about its goals for the trip, but not about Paulson's participation in G20 sessions where finance ministers and central bankers from economies representing 90 percent of total global output want to hear more about the U.S. "strong dollar" policy.

"Often Africa is defined as a monolith defined by famine, conflict and disease, a continent that is different from any other part of the world," said Ahmed Saeed, Treasury's deputy assistant secretary for African affairs.

"In contrast to that, Secretary Paulson is going to try to shine a light on a place that is very much like any other emerging market, a place where sound governance, good economic management, implementation of fundamentally sound economic policy is having positive consequences," he added.

GOOD NEWS

About half of Africa's nations now have growing economies with modest inflation rates and countries like Tanzania, South Africa and Ghana "a good news story" for reform, Saeed said.

In Tanzania, Paulson meets finance ministers from Rwanda, Uganda, Burundi, Kenya and Tanzania to talk about the benefits of a common market.

He also intends to discuss a new $698-million "compact" that the Millennium Challenge Corp. has agreed with Tanzania, effectively to provide grants for the development of infrastructure to boost output.

The G20 meeting near the South African port city of Cape Town is shaping up as a potentially high-profile airing of grievances among members over global imbalances stemming partly from the unbridled appetite of consumer countries like the United States for cheap goods from producers like China.