(Recasts with IMF confirmation, changes dateline)
WASHINGTON/HARARE, June 7 (Reuters) - The International Monetary Fund said on Friday it has agreed with Zimbabwe to monitor the country's programmes until the end of the year, paving the way for this sub-Saharan nation to clear billions of dollars of its debt arrears.
The move marks a major step towards Zimbabwe normalising relations with the IMF, which suspended its voting rights in 2003 over policy differences with President Robert Mugabe and non-payment of arrears.
"This programme is about showing that Zimbabwe can be trusted again," Finance Minister Tendai Biti told reporters in Harare earlier on Friday. "We engaged with the IMF on our terms."
While its voting rights were restored in 2010, Zimbabwe has not been able to borrow from international lenders since 1999 when it started defaulting on its debt. The country's external debt now stands at $10.7 billion.
Biti said the IMF board had agreed to allow Zimbabwe to negotiate debt relief and new financing by leveraging its natural resources.
"We agree with the authorities' view that a comprehensive arrears clearance strategy supported by development partners will be essential for Zimbabwe going forward," an IMF spokesman said.
The IMF said clearing arrears will require Zimbabwe to work more closely with its other creditors, and also requires the IMF monitoring program.
Under the staff-monitored programme, the IMF would want to see evidence of sound policies before agreeing to a lending programme.
Biti's comments came after Mugabe said he would hold elections by the end of July in line with a court order, angering rivals who want them delayed to allow for reforms to ensure a fair vote.
Zimbabwe is still emerging from a decade of economic decline and hyperinflation. The economy has slowly been on the mend since the formation of a unity government in 2009, and the government recently projected growth of 8.9 percent in 2013, after a 4.4 percent growth rate last year. (Reporting by MacDonald Dzirutwe, additional reporting by Anna Yukhananov in Washington; editing by David Dolan and Diane Craft)
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