Africa: Oil Prices Could Undercut Debt Relief for Africa, Agency Says

London — Africa's poorest countries could lose the benefits of a debt-relief package because of a sharp jump in the cost of their oil imports.

The debt deal, agreed by Group of Eight (G-8) finance ministers last month, is set to save sub-Saharan African nations about $1bn a year.

International Energy Agency officials believe, however, that the rise in crude prices will cost the region an additional $10,5bn a year in oil imports.

Agency officials estimate the oil import bill of sub-Saharan Africa will double to about $20bn on the back of crude prices of more than $55 a barrel.

As a result, the increase in oil costs "is going to be greater than the debt relief given to subSaharan countries this year", said International Energy Agency chief economist Fatih Birol.

The countries of sub-Saharan Africa are among the world's poorest. They depend heavily on imported oil and use it very inefficiently. Birol said the region required 80% more oil than a developed country to produce the same unit of gross domestic product (GDP).

The figures emerged ahead of this week's G-8 summit in Gleneagles, Scotland, which will discuss doubling aid to Africa and stepping up efforts to combat global warming.

German officials on Friday played down hope of a breakthrough at the summit.

They also argued that significant differences remained on Africa and climate change, the two issues London wants to focus on while it holds the rotating G-8 presidency.

G-8 officials also said the summit was organised poorly, with no agreement reached on many details in the draft communiqués. Berlin said this was unusual only a few days ahead of the summit.

It also said London's focus on a sharp increase in aid to Africa -- in particular its insistence that the summit should support a doubling of aid levels -- would not resolve the continent's underlying problems.

Under the terms of last month's deal, rich states wrote off $40bn in debt owed to the World Bank, International Monetary Fund (IMF) and African Development Bank by 18 of the world's poorest countries, most of them in Africa.

But the relief, worth about $1bn a year, will be more than offset by the sharp rise in oil prices in recent months. "Oil prices between $55 and $60 will cut 1%-2% off GDP in the sub-Saharan countries," Birol said.

African countries that export oil, such as Nigeria, will benefit from the rise in prices.

The IMF expects GDP growth in oil-exporting countries in the region to accelerate to 6,4% this year, from 6,2 % last year.

Oil importers will see growth slip to 4,5% this year from 4,7% last year.

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