Country Report Zimbabwe September 2010

Outlook for 2010-11: Policy trends

As part of the power-sharing agreement, the Ministry of Finance has been placed under the control of Tendai Biti of the MDC. This means that the MDC is set to lose support as it makes only limited progress in tackling the economy. Economic policy will continue to be driven by political considerations, with the struggle for influence in the power-sharing government between ZANU-PF and the MDC overshadowing policy reform. However, there is also likely to be a continuing struggle for influence between rival economic ministries that are controlled by the MDC; Mr Biti has adopted a notably lower profile since a cabinet reshuffle earlier this year in which he reportedly almost lost his job; nonetheless, sections of the party continue to believe that the finance minister is becoming too powerful. This will add to the confusion over Zimbabwean economic policymaking, and risks creating (or, more accurately, reinforcing) the perception in some areas that the MDC is simply not up to the task of running the economy, although this is partly because it lacks the political clout to force through its policies. The IMF has called on the government to entrench property rights, improve labour-market flexibility and reform the banking sector as part of a move towards a staff-monitored programme. However, although the government has abolished the bank statutory reserve ratio and doubled the liquidity ratio, broader reforms would be politically controversial and are unlikely to be implemented until mid-2011 at the earliest.

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