THE Zimbabwean economy continues to be trapped in a vicious cycle of sustained decline with no relief on the horizon.

While 2006 was undoubtedly the most challenging year to date, Zimbabweans should brace themselves for a tougher 2007 unless radical reforms and not piecemeal measures are urgently implemented.

The rapidly deteriorating socio-economic milieu is characterised by runaway inflation (1 281% as at December 2006), chronic shortages of foreign currency and fuel, very low levels of capacity utilisation, increasing incidence of poverty in excess of 80% of the total population and its glaring income inequalities.

The economy is riddled with distortions and encumbrances which provide a fertile breeding ground for corruption of variegated manifestations. Ultimately all these inauspicious developments have conspired to make Zimbabwe an uncompetitive investment destination to many an international investor.

With the shrinking formal economy, it is the informal economy that has taken over as the mainstream economy. Jobs in this economy are insecure, unrepresented, unregulated and generally suffer from decent work deficits.

Increasingly, formal sector workers are employed on a casual basis, creating insecurity of tenure. Those fortunate enough to remain in formal employment are increasingly being casualised.

Hordes of workers can no longer afford even transport to work, being reduced to walking to work everyday over long distances. So far efforts by the government to resolve the crises have been a zero sum game as they have not yielded much.

More worrying is the fact that the government continues to extend its tentacles and encroach into areas that can best be served by markets disenfranchising investors in the process.

While the "Look East" policy has received much hype there are few tangible benefits on the ground to justify this hype. The government should realise that opportunities arise from all geographic positions and hence focusing on one regional location is ill-advised and short-sighted in a globalising world.

The East is actually "Looking West, South and North" -- in fact in every direction for strategic partnerships and opportunities.

The days of splendid isolation and autarchy are long gone and countries that go that route do so at their own peril. While the international community can go without Zimbabwe, the country cannot go it alone and hence the need to swallow our pride and normalise our international relations as a basis for a sustainable turnaround.

The challenges facing the economy are indeed gargantuan and therefore transcend the monetary policy and/or the fiscal policy alone. The monetary policy can only influence economic considerations to a limited extent but it cannot influence the politics.

In essence the degrees of policy freedom and manoeuvre of the governor of the Reserve Bank of Zimbabwe or the Minister of Finance are very limited as they have no power to influence the political environment.

An accurate and correct diagnosis of a crisis is a prerequisite for the resolution of that crisis lest a wrong prescription be administered, creating serious complications in the process. This, however, should not be seen as a way of indulging in finger-pointing and the blame game but rather as a way of trying to self-correct.

Past governmental policies have always been predicated on flawed assumptions and incorrect causal factors.

While the government continues to blame everyone else except itself, a closer historical analysis of the origins of the crises indicates otherwise. The government through its own acts of commission and omission has been the major instigator and architect of the crises.

Political convenience has continued to override economic rationale. Events that immediately spring to mind include: the haphazard land reform exercise and subsequent disturbances on farms, unbudgeted compensation to war veterans, the Congo war, the muzzling of the independent press and the harassment of trade unions and the opposition among others.

Experiences from a number of countries have shown that there is a positive correlation between bad politics and economic decline. Bad politics defeats good economics.

Our situation has taught us that economic prescriptions can only work up to a certain threshold beyond which they are rendered ineffectual unless they are complemented by political reforms.

While a lot has been said about "sanctions", paradoxically trade statistics actually indicate that the trade balance between Zimbabwe and the West is favourable.

In any event, the withdrawal of balance-of-payments support, lines of credit, foreign direct investment and the so-called deliberate efforts to undermine our economic turnaround initiatives is a direct response to the implementation of wrong-headed policies on the part of the government and the deteriorating internal governance, and in particular the lack of respect for human and trade union rights, international norms and standards.

Government officials also continue to scorn and deride international leaders at every international gathering. In a way, Zimbabwe invited such measures due to its obstinacy, which in fact led to the country opting out of the Commonwealth. In this regard, it is the country that must reform, and not the other way round.

To add insult to injury the government continues to view other stakeholders in the economy with disdain and suspicion believing that it has a monopoly of solutions to the problems afflicting the country.

A case in point is the NEDPP which was implemented in April 2006.

This ill-fated programme was crafted without an iota of input from a number of stakeholders such as labour and other non-state actors save for a few elite business people.

Business has now, however, learnt the hard way that the government was never really sincere as some of their members were recently brought before the courts for flouting price controls.

Institutions established to promote social dialogue such as the Tripartite Negotiating Forum remain largely marginalised and ineffective. Therefore NEDPP was doomed right from the onset. Indications by the government that most if not all of the NEDPP objectives were not met therefore do not come as a major surprise.

However, it also has to be made clear that even if there had been stakeholder consultations there has been a dearth of firm political will and commitment to resolve the crises besides the usual rhetorical statements by government officials.

The prospects for the Zimbabwean economy going forward do not look bright at all as the government seems to be lacking the necessary political will to resolve the crises. The International Monetary Fund in its World Economic Outlook report forecast that inflation will reach an average of 4 279% in 2007 unless there are fundamental political and economic reforms. This leaves the position of the ordinary person more precarious and tenuous.

However, on a brighter note the situation though dire is not a lost cause. The starting point for any sustainable turnaround ought to be the resolution of the "political risk factor" as identified in the Kadoma Declaration.

The Kadoma Declaration deals with the political issues such as the restoration of good governance, restoration of normalcy and in particular relations with development partners.

The declaration spells out in detail what has to be done to deal with the "political risk factor". This includes, among others, the restoration of the rule of law and good governance and the de-politicisation of public institutions and the restoration of relations with development partners.

* Prosper Chitambara is an economist with the Labour and Economic Development Research Institute of Zimbabwe.