O`Neill slams fears of effect of aid on currency

US Treasury Secretary Paul O`Neill said yesterday poor African nations needed all the help they could get and dismissed concerns massive aid flows could destabilise currencies.

O`Neill was asked about the possibility high levels of aid could destabilise Uganda`s currency and hit its exports at a news conference following a meeting with Ugandan President Yoweri Museveni.

"...I`m certain from our conversations with President Museveni that there is not an effective limitation on valuable assistance into Uganda today, and from my conversation with him, I don`t believe there`s ever going to be one," O`Neill said.

O`Neill said he was aware of a "baloney theory" that aid above a certain level could destroy a country`s currency.

"I can`t tell you what I think a bogus idea that is. It really is equivalent to saying we have starving people but we need to let them starve because if we take your food aid it`ll hurt our economy," he said.

More than half of Uganda`s annual government budget comes in the form of aid from donor nations, channelled through agencies such as the International Monetary Fund and the World Bank.

Ugandan Finance Ministry officials confirmed they were worried about the effect of a big inflow of aid.

O`Neill, along with Irish rock singer Bono and a swelling entourage that now includes Hollywood actor Chris Tucker, earlier visited an HIV/Aids support organisation.

Doctors at the centre, which gets hefty US support to care for those infected with HIV/Aids, said it could not accept more assistance because of the currency fears.

The theory is that an influx of US dollars or other foreign currency could drive up the value of Uganda`s shilling. This would make Ugandan products more costly in foreign markets and choke off efforts to boost the country`s export income.

O`Neill, who was greeted enthusiastically by dancers and heard harrowing stories from patients, said it was "unbelievable" the clinic could accept no more money when its needs were so great. One woman told of losing her husband and six-year-old son and of having another son simply disappear. Uganda has made progress in the battle against HIV/Aids. About eight percent of its population is infected down from 30 per cent a decade ago because of aggressive education and intervention programmes, though it lacks resources for drugs.

Uganda was the third of four nations on O`Neill and Bono`s fact-finding mission to Africa. They headed for Ethiopia yesterday and O`Neill returns to Washington on Friday.

After his meeting with Museveni, the US treasury chief said the Bush administration was boosting donations to the African Development Bank and other lending agencies and making $5 billion more a year available for aid to needy nations.

Bono put a plug in for debt forgiveness for Uganda, which has about $80 million a year in debt service costs from interest payments on old debts. Bono called this an unacceptable level.

He added: "I want to assure the people of Uganda that they`ll have very strong voices in Washington and London and Paris and elsewhere arguing that the...debt should be cut completely and allow this country to have a fresh start."

"It seems like a really good idea unless the idea is that we should create another generation so that Bono when he`s 65 is still campaigning for debt relief," O`Neill said.