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Africa finance chiefs eye consensus on China funds

NOUAKCHOTT, Aug 1 (Reuters) - African finance ministers and central bankers met IMF and World Bank counterparts on Friday hoping to hammer out guidelines on handling a tide of new investment into the continent, much from resource-hungry China.

China, Brazil and India have been tying up infrastructure and loan deals in Africa, often in return for oil, metals and other resources they need to fuel their fast-growing economies.

Traditional lenders like the International Monetary Fund (IMF) and World Bank worry African states now benefiting from debt relief may run up new debt mountains they may find hard to sustain, especially if a commodities boom runs out of steam.

"We decided to set aside a day to talk about non-traditional financing sources, that is, China, India, Brazil and sovereign wealth funds, in order to clarify the way the IMF and World Bank appreciate the interests of these new sources of financing in Africa," said Ousmane Kane, Mauritanian central bank governor and president of the African Caucus of the IMF and World Bank.

The Caucus meeting in Mauritania, bringing together central bankers and finance ministers from the poorest continent, will hold a session to agree a common position on new investors, increasingly used as alternatives to traditional lenders.

Besides loans, deals with China often involve Chinese workers building roads and other infrastructure projects, while natural resources move the other way, and the sums are awesome.

IMF officials say they must examine the debt implications of a $9 billion mining and infrastructure deal between China and Democratic Republic of Congo before deciding if Congo will qualify for an IMF programme and subsequent debt relief package.

Opposition politicians and anti-graft groups in Niger have criticised the lack of transparency surrounding a deal between the government and China's state oil company CNCP which could be worth $5 billion to one of the poorest countries on earth.

RESPONDING TO AFRICA'S NEEDS

"The advantage of the new financiers is that they respond to a need that Africa has, which is infrastructure, whereas traditional donors focus on things like education," said a finance official at the meeting who declined to be named.

"An issue to be discussed is the way these loans are backed by mines and oilfields, which in the long-term is a big concern," he said.

Despite rising prices for many of Africa's commodity exports in recent years, many economists worry countries which have benefited from huge debt forgiveness packages risk plunging into a new round of unsustainable borrowing from new lenders eager to secure access to oil and minerals.

"A big concern is debt. Lots of debt has just been wiped out, and now with China coming, are we going to see a new cycle? Prices of oil and other resources are high at the moment, but if prices drop, African countries will still have to pay interest on loans from China," the delegate said.

African countries, rather than lenders, must be responsible for fully assessing the future obligations to which they commit by accepting loans from new sources, Mauritania's Kane said.

"We are for transparency ... The meeting aims to clarify the position between traditional and non-traditional financing sources, but most important is that Africa has to give its position to these non-traditional sources, to tell them what they have to do for us," he said.

The Chinese Developent Bank's presence at the IMF-World Bank meeting demonstrated the sea change in African finance in recent years.

"Like it or not, China is a big part of Africa now," another delegate said. (For full Reuters Africa coverage and to have your say on the top issues, visit:

africa.reuters.com

) (Editing by Alistair Thomson and Stephen Nisbet)

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