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INTERVIEW-Zimbabwe sees 7% growth, rues $6.2 bln debt
May 25, 2010 / 7:06 PM / 7 years ago

INTERVIEW-Zimbabwe sees 7% growth, rues $6.2 bln debt

* Finance minister sees 7 pct growth, up from 4.8 pct

* Zimbabwe must address "crippling" $6.2 billion debt



By Tim Cocks and Richard Valdmanis

ABIDJAN, May 25 (Reuters) - Zimbabwe’s economy should grow faster than expected this year thanks to $1 billion in foreign investments and some expected donor aid, but its debt burden is "crippling", the finance minister said on Tuesday.

Finance Minister Tendai Biti told Reuters in an interview at the African Development Bank annual assembly in Abidjan that accumulated interest was pushing up public debt and it currently totalled around $6.2 billion, higher than previous estimates.

He said there was little chance of Zimbabwe getting its own currency back -- it was abandoned in favour of the dollar last year -- while its economy remained saddled with an estimated $1.9 billion current account deficit.

"We don’t have an economy that can sustain a currency," he said.

He said investments, mostly infrastructure, totalling around $1 billion should accelerate growth over the rest of the year and that a donor conference on Zimbabwe in Oslo later this year was expected to bring aid to relieve the government’s chronic liquidity problems.

"Our growth forecast for this year is 7 percent. We had revised it downwards to 4.8 percent because of lack of capital but I‘m very optimistic we will have stronger growth in the second half of the year," Biti said.

Diamond sales would also have a positive impact.

Diamond exploration has been marred by a row between the government and British-based African Consolidated Resources (ACR) AFCR.L. Biti said the legal process would be slow.

"As long as it remains unresolved it will continuously put a shadow over diamond mining," he said.



STRONG GROWTH, BIG DEBT

After years of political turmoil and negative growth, the southern African country is enjoying relative stability, but foreign investors remain wary.

SABMiller’s Zimbabwe unit said this month it would spend $112 million in the next two years to lift output.

Biti decried what he said was an out of date assessment of Zimbabwe as a high risk destination.

"What I‘m really worried about is the lack of capital, foreign investment of bilateral credit lines," he said.

"The reason is largely because of the perception of high risk. In our macroeconomic foundations, we are doing better than a huge chunk of African countries, but we’ve got baggage -- a hangover from our years of conflict."

An OECD/African Development Bank report on the state of Africa’s economies released on Monday put Zimbabwe’s projected growth for the year at 6 percent.

Infrastructure projects included hydroelectric and thermal power plants to relieve acute power shortages, road construction and the rehabilitation of a bridge.

Biti said Zimbabwe was still looking for about $500 million of investment to complete renovation work on the Kariba hydroelectric dam, on the Zambezi river.

Zimbabwe announced in January it was seeking debt relief under the Heavily Indebted Poor Countries initiative.

Biti said Zimbabwe had taken steps towards macroeconomic stability, for instance with inflation in double digits year-on-year, compared with 500 billion percent in 2008.

Other areas of investor interest include diamond deposits and farming, in what used to be southern Africa’s bread basket.

Biti said land reform, a flashpoint of the crisis between President Robert Mugabe and opponents that left productive land fallow for years, would be resolved first.

A land audit would "rule out multiple farm owners, end inefficiency" and put fallow farms to work.

(Editing by Ruth Pitchford)

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