Zimbabwe is reprieved by the IMF

Robert Mugabe has been previously critical of the IMF

Zimbabwe has been given six months' breathing space by the International Monetary Fund, before facing possible expulsion over its debts.

Zimbabwe has been in debt to the IMF since February 2001, and now owes a total of $295m (£159m).

The IMF postponed calls for compulsory withdrawal after resumption of some payments, and limited improvements in Zimbabwe's economic policies.

Zimbabwe now intends to repay $1.5m (£0.8m) every three months.

The IMF says it will consider in six months "whether to recommend... that Zimbabwe be asked to withdraw from the IMF".

It comes after an IMF research team visited the country in March, and praised Zimbabwe for repaying $6m (£3.24m) of its $290m (£159m) debt.

"The verdict from the fund came as good news upon which greater efforts will be put to further consolidate the gains made so far," said Gideon Gono, governor of Zimbabwe's Reserve Bank .

He added that he felt "the stay of execution" was granted by the IMF to give Zimbabwe time to pull together its economic strategy.

Economy in shambles

Country watchers say Zimbabwe, in the fifth year of recession, is on the brink of an economic catastrophe.

According to the IMF, Zimbabwe's economy has shrunk dramatically.

GDP has fallen by 30% over the last five years and another 4 to 5% decline is expected this year.

Year-on-year inflation rate reached 600% at the end of 2003, but has declined to 450% in the first five months of this year.

The country's social conditions remain alarming, with about two thirds of Zimbabwe's population face food shortages.

The country suffers from one of the highest rates of HIV/AIDS infection in the world, which, says the IMF "remains largely unchecked".

Policy differences

The IMF has already substantially downgraded Zimbabwe's membership over the past three years.

It withdrew most financial aid and technical assistance in 1999 and suspended its voting rights over policy differences with the Mugabe government.

If Zimbabwe was to be expelled from the IMF it would only deepen the country's isolation.

In 2003, Zimbabwe was suspended from the Commonwealth after charges that the country's president, Robert Mugabe, had rigged his re-election.

Mr Mugabe has been in power since independence from Britain in 1980. He has repeatedly accused the IMF and the World Bank of being used by Western powers to further their political agendas.

The IMF's deputy director for Africa urged Zimbabwe to normalise relations with the rest of the world to stem its economic decline.