Zimbabwe mulls mortgaging minerals to offset debt

The ministry of finance report seen by AFP said various options were being considered for paying off the external debt, an essential step to secure new financing from lenders for 2010-2012.

"A key conditionality for unlocking new financing of 7.5 billion — 10 billion (dollars) … evolves around the development of a Debt Relief and Arreas Clearance Strategy for the country’s external debt overhang of 5.4 billion, of which 3.8 billion is in arrears," the report said.

Also under consideration was using internal revenue resources, asking for debt restructuring from the Paris Club of lender nations or "going through the Highly Indebted Poor Country (HIPC) route for debt forgiveness," the report added.

Government, in co-operation with major creditors will undertake in-depth studies on the various options to come up with a "sustainable debt management and clearance solution which balances the interests of the country and its creditors," it added.

Zimbabwe has vast mineral resources, but the sector has been set back by a near decade of political and economic instability worsened by a hyperinflation, and power cuts.

According to Finance Minister Tendai Biti the country will need 45 billion dollars to restore its economic performance to levels seen in 1996/7.

Zimbabwe’s economy has contracted every year since then, but is expected to grow 4.7 percent this year after the local currency was abandoned in January and a unity government took office the following month.

President Robert Mugabe, who has ruled since independence in 1980, was forced into the power-sharing arrangement with Prime Minister Morgan Tsvangirai following disputed elections last year.

The deal, known as the Global Political Agreement (GPA), remains shaky due to a raft of disputes over key jobs and claims that Tsvangirai’s supporters remain the target of official persecution.