Country Report Zimbabwe July 2009

Outlook for 2009-10

• The prime minister, Morgan Tsvangirai, may be acting as the public face of the government of national unity (GNU) on foreign trips, but all the signs are that the president, Robert Mugabe, is winning the struggle for control.
• Tensions over the timing and scope of constitutional talks could fatally undermine the GNU.
• With Western states largely limiting themselves to humanitarian assistance and regional countries unable to provide the vast sums of assistance required, Zimbabwe is seeking help from donors such as China.
• A mini-budget due in July 2009 is likely to include tax hikes and an increase in public service wages. The former are unlikely to be sufficient to fund the latter.
• Government services will continue to deteriorate, although donor funding of part of the healthcare and education budgets could ease the pressure somewhat.
• Prices are continuing to fall but the rate of decline is slowing, and wage pressures, international fuel prices and imported inflation are likely to send prices back up again in the second half of the year.
• Mr Mugabe has mooted a return to use of the Zimbabwe dollar; this would prove highly unpopular with businesses.
• Tobacco earnings are set to fall this year because of lower international prices, and there is little scope for increased production in 2010.

Monthly review

• Mr Tsvangirai has toured a number of Western capitals, seeking to promote the power-sharing government's policies to sceptical donor nations.
• Mr Tsvangirai has raised an estimated US$150m in fresh aid pledges, and the government is negotiating with China for a US$950m credit line.
• Simba Makoni, who stood as an independent in last year's presidential poll, is forming a new political party and hopes to capitalise on growing disenchantment with both ZANU-PF and the MDC.
• The IMF has detected a "nascent economic recovery", sparked by a more liberal economic environment and price stability. The Fund is unlikely to provide fresh aid until the country clears its arrears, however.
• A non-governmental organisation has accused the government of human-rights violations in the mining sector.