Massive debt holds back plans for rebuilding country

President Robert Mugabe and Prime Minister Morgan Tsvangirais government has, over the past year, been mulling over the options, including seeking debt forgiveness.

But the coalition administration is yet to agree on a course of action to resolve a debt crisis that analysts say is increasing the countrys credit risk profile and undermining investment and growth.

Cabinet is expected to debate a possible new debt strategy, although Biti insists the government has developed a new hybrid programme to address burgeoning debt.

The debt overhang estimated at over US$6.7 billion remains an impediment to efforts to unlock external financing requirements for the countrys huge developmental programmes, Biti said.

The country is accumulating interest at a rate of about US$300 million annually, which is over five per cent of GDP (gross domestic product), he added.

Harare owes the World Bank US$600 million, the African Development Bank US$400 million and the International Monetary Fund US$140 million. The rest is interest accrued over the years.

The multilateral lending institutions have told the Harare government to first clear its arrears with the organisations before they can entertain any request for budgetary assistance.

Zimbabwe desperately needs outside help to pay for reconstruction. The government has said it needs US$10 billion in foreign funding to put the economy on a sustainable path to recovery.

Economic analysts believe that negotiating for debt restructuring or forgiveness is the only viable option available to Biti and his team as they try to re-engage the international community for economic aid.

But his chances of convincing sceptical lending institutions to restructure or forgive Zimbabwes debt ultimately depend on developments on the political front, where deep uncertainty remains despite progress made over the last year.