HARARE (Reuters) - Zimbabwe will seek highly indebted poor country status to have its $6 billion international debt cancelled to help spur economic growth, Finance Minister Tendai Biti said on Monday.
Zimbabwe’s unity government, formed last year by bitter foes President Robert Mugabe and Prime Minister Morgan Tsvangirai to end an economic crisis, has failed to attract much-needed foreign aid, partly due to huge debts.
Zimbabwe has enlisted the support of the African Development Bank (AfDB) to draft a debt relief plan that would unlock access to international finance, seen as crucial to revive the economy after a decade of decline.
“There is a huge opportunity cost Zimbabwe is suffering as a result of the stifling debt. Without the debt overhang we would be growing by 15 percent annually,” Biti told reporters in Harare after meeting a visiting team of senior AfDB officials.
Biti said while there were divergent views on the debt clearance strategy, seeking HIPC status -- which would require sweeping reforms and setting firm performance targets -- was the best option.
“There is no consensus position yet in Cabinet, but I’ve said give me an alternative that allows us to get this debt serviced without prejudicing our meagre resources,” Biti said, adding that the government would make a “bold” decision on the matter within the first quarter of 2010.
Visiting AfDB vice president for operations, Aloysius Ordu said although Zimbabwe’s power-sharing government had made progress, there would be no full co-operation until Zimbabwe resolved the debt issue.
Ordu said the HIPC scheme was Zimbabwe’s best chance of clearing its debt and re-engaging with multilateral finance institutions.
“For Zimbabwe, HIPC will be very important. Unless you clear existing debt, you cannot access new money. Many African countries have gone through this route and other options (of debt servicing) are very expensive,” he said.
“The Zimbabwe government has asked AfDB to assist with this process of re-engaging multilateral finance institutions.”
To qualify for HIPC status, a country’s debt has to be considered to be beyond its ability to repay from its own resources. The country is also expected to commit to sound economic management and institute broad reforms.
Once one of Africa’s most promising economies, Zimbabwe has seen a sharp economic decline, with the IMF saying per capita GDP fell from $519 in 2000 to $268 in 2008. In 1990, per capita GDP was around $900.
An estimated 83 percent of the population lived on less than $2 a day in 2005, with the situation worsening considerably by 2008 when inflation reached about 500 billion percent.
Up to 3 million Zimbabweans have fled the crisis, mostly to become economic refugees in neighbouring South Africa.