* Fears impact if Western austerity aid will hit aid
* Global currency face-off could also dent growth
* Believes African countries institutionally stronger
By Peter Apps, Political Risk Correspondent
LONDON, Oct 19 (Reuters) - States like Somalia and Sierra Leone could ultimately cost the international community more money if they were destabilised by short-term cuts in Western aid, Africa's main representative to the IMF said on Tuesday.
Executive director Samuel Itam, who represents 20 African countries at the IMF board including South Africa and Nigeria, told Reuters he understood why European governments, trying to reduce record deficits, would target aid to Africa.
But reducing aid could undo recent gains and create longer term problems that would be more expensive to solve, he said. In Sierra Leone, cutting aid would force the government "...to find other resources... or completely dismantle programmes," he said.
"It is an easy thing to -- there is no domestic political reaction if you cut foreign aid," he said. "But that is too short-term and too myopic -- it will come back to hurt you in the longer run. Medium term, if you want stability and peace you have to contribute."
Africa could also be threatened if a global currency stand-off worsened, but overall, the continent was better placed than ever before to benefit from record commodity prices and competition between developed and emerging powers, Itam said.
He said that while new investment from China and elsewhere was welcome, it was much more narrowly focused on single investment projects and could not simply replace Western aid.
Overall, he said his base case prediction was that Africa would continue to grow by about 5-5.5 percent per year -- but significant donor reductions or other shocks could reduce this and it remained short of the 7-7.5 percent needed to seriously reduce poverty.
He said he was also concerned by rising global tensions over currency strength, with the United States and China facing off and many emerging economies keen to weaken their currencies to promote exports.
Some worry that trade protectionism could result. "That could become adverse for sub-Saharan African countries as it would eventually feed through to demand for their exports."
While South Africa might benefit in some ways from imposing capital controls to cap currency strength as it would make exports more competitive, its economy would also suffer as controls would deter foreign investment, Itam said.
"Having a weaker currency would only bring temporary benefit," he said.
High commodity prices and international competition over African resources have sometimes fuelled conflict and corruption, but Itam said institutions were now much stronger.
Countries such as Uganda were rigorous in ensuring money from new oilfields was ringfenced, he said, adding that his own country, Sierra Leone, would learn from its diamond-fuelled civil war when it came to handling new potential oil wealth.
"I think the key change is that ordinary people understand this and really demand transparency," he said. "With Sierra Leone, everyone knows diamonds were a disaster and I think that will help us to do it better this time round." (Editing by Tim Pearce)