President Robert Mugabe

Zimbabwe’s finance minister says the country’s industrial sector has collapsed and that the surviving economy has moved to the informal sector.

Patrick Chinamasa was explaining the financial difficulties facing the country that has made it impossible for government to pay workers, including soldiers,  who it owes two months salary.

The finance minister also blamed international sanctions on Sunday for the cash crunch that has triggered rare popular protests against President Robert Mugabe.

Western countries imposed sanctions in 2001 on Mugabe’s government over allegations of vote-rigging and human rights abuses, which he rejects, while lenders such as the International Monetary Fund (IMF) have frozen financial aid since Harare defaulted in 1999.

“Sanctions crippled our capacity to own our international obligations (debt payment),” Chinamasa told Reuters when asked about the wage-payment delays during an African Union summit in Kigali, Rwanda. He did not say specifically which international obligations had been affected.

“Our industry sector collapsed, the formal corporate structure collapsed and it translated itself into informal sector. So we have now a situation where revenue collection from the informal sector is not easy. We need to come up with new policies,” he added.

Anger is rising in Zimbabwe over high unemployment, corruption in government and shortages of money, which has seen people spending hours in bank queues to withdraw their money.

Without balance of payment support and foreign credit, the government is seeking to clear $1.8 billion arrears to the IMF, African Development Bank and World Bank in a bid to unlock new funding.

The IMF said on Thursday it was still far from a financial programme with Mugabe’s government, which would need to resolve issues of governance, accountability, transparency and carry out economic reforms before receiving any cash.