Diamond sales to repay Zim debt

Zimbabwe will use revenue from diamond sales to repay part of its external debt totalling $7.1bn, Prime Minister Morgan Tsvangirai said on Tuesday, Tsvangirai also sought to reassure investors over calls by President Robert Mugabe, his political adversary, for elections this year, making clear reforms agreed in their power-sharing agreement would be carried out first.

"President Robert Mugabe, the region and I have agreed to follow the Global Political Agreement (GPA) process to ensure a credible poll," Tsvangirai told an investment conference.

"There is no anxiety among Zimbabweans and investors about being ambushed with an election that has no pre-conditions and not in line with the dictates of the GPA," he said.

Under the pact that was the basis for Mugabe's ZANU-PF and Tsvangirai's MDC party forming a power-sharing government in 2009, Zimbabwe must free the media, draft a new constitution and hold elections within two years. But the process is running months behind schedule and elections are now expected in 2012.

Mugabe has been trying to boost the economy by winning approval for diamond sales through the Kimberly Process, a world monitor of the diamond trade intended to outlaw trafficking in so-called conflict diamonds. "The government has so far sold diamonds worth $300mn, and the money will be used to service the debt and also to rehabilitate Zimbabwe's faltering industry," Tsvangirai said.

Zimbabwe was $1.3bn in arrears on money owed to the International Monetary Fund (IMF), World Bank and African Development Bank as of last July. It plans to seek relief for 68% of its debt from foreign lenders and pay the remainder using proceeds from minerals such as diamonds and platinum.

Finance Minister Tendai Biti told the same conference: "The resolution of the debt is crucial for us to be integrated in the international community and also the resolution of our political problem."The government has set up a debt management office which has started talks with foreign lenders on debt.

Rights groups have accused Zimbabwe's military of widespread atrocities in the diamond fields in 2008 as Mugabe's previous government moved to stop thousands of illegal miners.

Mugabe has accused Western countries of working to stop Zimbabwe from benefiting from its mineral resources.

Mugabe has worried foreign investors in recent months by calling for an early poll and repeating threats to take over foreign firms based in countries that have imposed sanctions for rights abuses. The MDC has warned early elections could cause economic chaos.