By Wendell Roelf

CAPE TOWN (Reuters) - High inflation and budget deficits in southern Africa are likely to block any effort to form a customs union in the region by 2010, South African Finance Minister Trevor Manuel said on Wednesday.

The 14 members of the Southern African Development Community (SADC), which includes economic powerhouse South Africa as well as recession-ravaged Zimbabwe, have been discussing the idea of developing a customs union since 1999.

"But I don't know how you get there if you have countries that have quadruple-digit inflation or immeasurable fiscal deficits," Manuel said in a presentation to a South African parliamentary committee in Cape Town.

"My submission ... would be that we won't get there by 2010," Manuel said while adding that SADC should not abandon the idea of liberalising trade and moving closer toward monetary and economic integration.

Although a number of SADC members, most notably Angola and Zambia, have managed to tame high inflation and reduce budget deficits, others remain far off the basic macroeconomic targets needed to achieve a free trade zone and customs union.

Reducing inflation to single digits and keeping the ratio of debt to GDP to 5 percent or less by 2008 were among the key targets cited by SADC. Manuel said South Africa would have no problem meeting these criteria.

While inflation has fallen dramatically throughout much of the region, deficits remain stubbornly high in Mozambique and a handful of other countries, casting a shadow over the prospect of closer regional economic ties.

An economic meltdown in Zimbabwe, which is struggling with inflation of more than 7,000 percent, has added to doubts, especially in South Africa, that a customs union could be achieved in the near future.