An International Monetary Fund report says the economy of Zimbabwe will continue on its downward spiral unless the government makes serious policy changes.

The recently published IMF country report for Zimbabwe says due to the Zimbabwean authorities failure to abide by their commitments, the economic outlook for the country looks bleak. It also noted a sharp deterioration of the country's economic and social conditions this year.

The report forecasts that inflation, which peaked at 624 percent in early 2004 but slowed for a while afterward, has once again gathered pace and should be more than 400 percent by the end of this year. Inflation currently stands at 265 percent. The IMF projects that the economy will shrink by seven percent this year.

The Zimbabwe government projects the economic decline will not be as large as IMF estimates, but independent Harare-based economist James Jowa told Reuters news agency that the IMF is painting a much more accurate picture of the situation.

The IMF report notes that as a result of the sharply declining economy, Zimbabwe's human development indicators have deteriorated sharply. It says more than two out of three Zimbabweans are unemployed while poverty and emigration are on the rise; HIV infection is estimated at 25 percent of the adult population and life expectancy has fallen to below 40 years, from around 60 just 15 years ago.

The report also says the government's recent demolition of unapproved homes and targeting of informal businesses will add to the country's problems. A 2002 World Bank report noted that economic activity in the informal sector accounted for more than half of Zimbabwe's GDP.

Zimbabwe is faced with its worst economic crisis since independence in 1980. Critics of the government of President Robert Mugabe cite mismanagement for the problems.

Mr. Mugabe blames what he calls his Western detractors for imposing sanctions on Zimbabwe as punishment for his sometimes violent land reform program, launched in 2000. Under the policy, white farmers lost their land for the resettlement of landless blacks.