Country Report Zimbabwe June 2008

Outlook for 2008-09

• With oppression and intimidation of the opposition increasing, the scene is set for Zimbabwe's president, Robert Mugabe, and his party to steal power, even though the March 2008 elections represented opposition victories.
• Mr Mugabe is likely to retain the presidency at a second round of voting; those who voted against him in the first round will continue to be persecuted.
• Although the opposition has gained a parliamentary majority, ZANU-PF is disputing a number of seats in an effort to regain the majority. Even if it fails, Mr Mugabe will simply bypass parliament and rule by decree.
• Economic policy will continue to be driven by political considerations, and the economy will continue to contract.
• Hyperinflation will continue throughout the forecast period as the government continues to print money to finance its activities. This will be compounded by high global food and fuel prices.
• The new float of the official exchange rate is likely to be short-lived as the government will be unwilling to face the additional economic pain of it plummeting in line with the parallel rate.
• A rise in metal exports should push up export earnings in 2008-09. However, imports will remain high, owing both to high world oil prices and substantial food imports.
• As a percentage of GDP, the current-account deficit will surpass 60% by 2009 because of the ongoing contraction of the economy.

Monthly review

• Zimbabwe has moved towards the June 27th presidential run-off amid escalating evidence of widespread state violence by Mr Mugabe's regime against suspected opposition supporters, especially in the rural areas.
• The opposition leader, Morgan Tsvangirai, has been repeatedly detained by police as the government attempts to restrict his ability to campaign.
• There has been a power shift within Mr Mugabe's regime, with Emmerson Mnangagwa rising to prominence and running Mr Mugabe's re-election campaign.
• The food crisis has been worsened by Mr Mugabe's decision to ban aid agencies from distributing food within the country.
• The float of the Zimbabwe dollar has not been a success and the majority of foreign currency transactions are still outside the reach of the central bank.

Source: Country Report