Zimbabwe should seek HIPC debt relief, minister says

* Zimbabwe should aim to have IFI debt cancelled-minister

* Minister says would be immoral for Zimbabwe to pay debt

LONDON, Sept 26 (Reuters) - Zimbabwe should aim to have its debt to international financial institutions cancelled by seeking access to the Heavily Indebted Poor Countries (HIPC) initiative, a Zimbabwean minister said on Saturday.

Gorden Moyo, minister of state in Prime Minister Morgan Tsvangirai's office, said it would be immoral for Zimbabwe to pay off its debts to the International Monetary Fund, World Bank and African Development Bank when it could not pay teachers.

"We should be having conversations with the international financial institutions to get them to either reschedule our debt or to cancel our debt," he said, speaking at a Zimbabwe investment conference in London.

Moyo noted that the IMF and World Bank had launched the HIPC initiative in 1996 to help countries unable to pay their debts.

Some people did not want Zimbabwe classified as a heavily indebted poor country, "but that's what we are, if you look at our debt ratios, if you look at our economy", he said.

"We just need to be reclassified and get our debt cancelled. Once we get our debt cancelled, the country will begin to have access to World Bank resources," he said.

He said the move would also give Zimbabwe access to the IMF's Poverty Reduction and Growth Facility, which provides loans to low-income countries at subsidised rates.

"We will get the resources and we will get the credit lines and we can stabilise our economy," he said.


Finance Minister Tendai Biti was working on a debt and arrears clearance strategy for Zimbabwe, Moyo said.

Tsvangirai formed a power-sharing government with veteran President Robert Mugabe in February to end a political crisis that shattered the once prosperous southern African nation's economy.

The IMF said this month it had transferred around $400 million in IMF special drawing rights to Zimbabwe under a global agreement to bolster the reserves of the IMF's 186 member countries in the wake of the worldwide financial crisis.

The IMF said, however, it would withhold another $102 million of Zimbabwe's allocation by placing it in escrow until the country had cleared its $140 million IMF debt.

Zimbabwe owes about $1.1 billion to the World Bank and the African Development Bank. Total arrears to official and private creditors amount to about $3.8 billion.

To qualify for HIPC, countries must commit to poverty reduction through policy changes and demonstrate a good track record over time, as well as meeting other criteria.

The IMF's website lists 40 countries eligible for HIPC assistance. They do not currently include Zimbabwe.

Half the funding for HIPC comes from the IMF and other multilateral lenders and the rest from bilateral creditors.

Western donors have been reluctant to give large-scale development aid to Zimbabwe until they see more evidence of reforms being implemented. (Editing by Sue Thomas)