The IMF said Zimbabwe needs “decisive action” to lower its fiscal deficit, tighten monetary policy and set up a market-based currency system.

The IMF urged President Robert Mugabe to change his policy and “come in from the cold” to avert economic disaster.

“A rebuilding of relations with the international community is a critical part of the effort to reverse the economic decline,” an IMF mission which recently visited Harare said in a statement.

The IMF team found much of concern despite “cordial meetings” with Finance Minister Herbert Murerwa and the Reserve Bank of Zimbabwe (RBZ) leadership.

Zimbabwe has fallen behind in IMF repayments on more than A$390million in debt since 2001.

The organisation in February gave the government six months to meet its obligations or face expulsion.

The IMF closed its offices in Zimbabwe late last year as relations worsened with the Mugabe government, which blames US, British and European Union sanctions for its economic plight.

Mr Mugabe’s government has earned pariah status in the West, accused of rigging elections and of plunging parts of its population into starvation by confiscating productive land from white farmers.

The government is now being investigated by a United Nations
envoy after demolishing homes in what it calls an effort to rid the country of squalor and crime.

The UN says at least 200,000 people have lost their homes in the campaign but the Zimbabwe opposition maintains that 1.5 million people have been affected.

Critics claim the aim of the campaign is to punish urban voters who supported the opposition in March elections won by Mugabe’s ruling ZANU-PF party and to drive Zimbabweans back to the
countryside.

But the IMF was in no doubt that the operation was worsening Zimbabwe’s dire economic situation.

The body said economic output is expected to decline “sharply” this year, partly due to drought and foreign exchange shortages.

Meanwhile, Australian Foreign Minister Alexander Downer said Canberra is considering joining New Zealand and Britain in trying to ban Zimbabwe from international cricket because of human rights abuses.

While the Australian cricket team isn’t due to play against Zimbabwe this year, New Zealand has a match scheduled for August.

Mr Downer says he’s been approached by his New Zealand counterpart to put pressure on the International Cricket Council.