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HARARE (Reuters) - Zimbabwe's economy will grow for the second successive year in 2010 due to positive policies and strong commodity prices, the International Monetary Fund said on Monday, while calling for more reforms to sustain the recovery.
The southern African country's economy, battered by hyperinflation which reached 500 billion percent in 2008, grew 5.7 percent in 2009 -- the first time in a decade -- under a power-sharing government set up by bitter foes President Robert Mugabe and Prime Minister Morgan Tsvangirai.
An IMF team that visited between Oct 25 and Nov 3 for routine discussions with government and the private sector said Zimbabwe would have a budget surplus this year, among other signs of improved economic conditions.
"Supported by renewed efforts to strengthen policies and favourable shocks, the Zimbabwe economy is completing its second year of buoyant economic growth after a decade of economic decline," the IMF said.
"The budget is projected to generate a cash surplus in 2010, governance at the Reserve Bank of Zimbabwe is improving, and the government is working toward strengthening the business climate."
The IMF has projected the economy to grow by 2.2 percent in 2010, while Finance Minister Tendai Biti says it is on course for 8.1 percent growth this year and 10 percent in 2011.
The IMF said there should be more funding for infrastructure and social needs in the 2011 budget and recommended that the government cap cash budget expenditure at $2.5 billion.
Higher gold and platinum prices have boosted exports and government revenues in 2010, while favourable weather conditions contributed to higher agricultural output.
Analysts have said Zimbabwe's shaky coalition government, which has squabbled over key government appointments and the pace of reforms, was holding back the pace of recovery.
"Political stability is also key to consolidating gains in macroeconomic performance," the IMF said, adding that more reforms were needed to realise potential.
"Priority areas include reducing labor market rigidities, establishing security of land tenure, clarifying ownership requirements under the indigenisation legislation, and addressing concerns about governance in the diamond sector."
The Fund also said strict regulation had seen risks in the banking system easing since the beginning of 2010.
It added that aid to Zimbabwe, which owes multilateral finance institutions nearly $7 billion, would remain limited to technical assistance.