WASHINGTON, Oct 19, 2007 (LBO) - IMF chief Rodrigo de Rato said countries emerging from conflict should be careful about commercial borrowing, but welcomed investor willingness to buy into local currency developing country bonds.

Economic analysts have said that unlike aid from countries like Japan, Chinese loans so far have tended to be on higher interest and shorter repayments periods.

"Developing countries have previously been able to borrow in currencies like the dollar and the yen, but investors are now willing to buy into local currency sovereign and corporate debt," de Rato said.

His comments came less than six months after Sri Lanka raised 460 million dollars by selling rupee bonds to foreign buyers.

De Rato however said countries emerging from conflict should be careful about foreign commercial borrowing.

Responding to a question on how China was making deals for natural resources in Africa and also providing finance, de Rato said China was looking for energy and other resources like any other fast growing country and it was a welcome move.

However he warned that countries in Africa that were just emerging from conflicts may not have the capacity to borrow on expensive commercial terms.

Some of the poorest countries in Africa are known as Highly Indebted Poor Counties (HIPIC) just emerging with better sovereign balance sheets after a multilateral debt forgiveness scheme from lenders.

In recent times Sri Lanka has also signed up for Chinese finance but they are mostly provided by China's Export Import Bank on onerous terms.

Economic analysts have said that unlike aid from countries like Japan, Chinese loans so far have tended to be on higher interest and shorter repayments periods.

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