20110308
reuters

HARARE (Reuters) - Zimbabwe will use revenue from diamond sales to repay part of its external debt totalling $7.1 billion, 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 $300 million, and the money will be used to service the debt and also to rehabilitate Zimbabwe's faltering industry," Tsvangirai said.

Zimbabwe was $1.3 billion 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 percent of its debt from foreign lenders and pay the remainder using proceeds from minerals such as diamonds and platinum.