Harare - Zimbabwe's government has failed to attract funding from foreign donors for next year's budget because they feared the money could be misused if the central bank is not reformed, the finance minister said on Tuesday.

Tendai Biti, from Prime Minister Morgan Tsvangirai's Movement for Democratic Change (MDC) told parliament that the central bank had to be reformed to build confidence among donors and investors who have withheld critical funding for reconstruction.

Tsvangirai formed a unity government with long time rival President Robert Mugabe in February and the administration says it needs up to $10bn to prop up an economy wrecked by hyperinflation and unemployment.

"As long as it (the central bank) is in its current form, this will constrain the ability of this government to attract foreign direct investment and budgetary support," said Biti, during a parliamentary debate on a central bank amendment bill.

"As I speak to you, we have failed to attract a single cent for budget support. The first thing that they (donors) ask is 'are you going to put our money through the central bank' and I have no answer to that."

Some critics blame central bank governor Gideon Gono, a Mugabe ally, for policies that helped cripple the economy - stoking inflation by printing money and taking over functions of the national treasury, including buying farming inputs and extending financial support to government departments.

Tsvangirai and Mugabe are locked in a dispute on how to share power, with the former trade union leader accusing Mugabe of refusing to appoint a new central bank governor and attorney general as part of a political pact signed last year.

Mugabe has vowed that Gono will not be sacked.

The Reserve Bank of Zimbabwe Bill seeks to clip the powers of the governor by appointing an independent chairperson and board, and to restrict the bank to dealing with interest rates, currency management and regulating banks.

The governor's core function would be to chair a planned monetary policy committee.

"I want honourable members to understand that we have a genuine problem of credibility and accountability at the central bank. It is bleeding and we need to stop that bleeding," Biti said.

He added the Reserve Bank had accumulated $1.5bn in foreign debt last year alone.

- Reuters