President Robert Mugabe, 86, and his party, the Zimbabwe African National Union--Patriotic Front (ZANU-PF), have ruled Zimbabwe since its independence in 1980. Rising inflation and unemployment rates contributed in the late 1990s to the creation of the opposition Movement for Democratic Change (MDC). The MDC enjoyed initial success, campaigning against a referendum in 2000 that would have expanded the president's powers, made government officials immune from prosecution, and allowed the uncompensated seizure of white-owned land for redistribution to black farmers. The referendum failed, and the MDC won nearly half the parliamentary seats in that year's election. Members of ZANU-PF have since taken numerous, often undemocratic actions to maintain power. Zimbabwe's most recent elections were held in 2008. They were very controversial and sparked serious political violence that illustrated the deep divide between ZANU-PF and the opposition. After months of uncertainty following a September 2008 power-sharing deal known as the Global Political Agreement (GPA), ZANU-PF and the MDC reached a final accord in January 2009. It led to the creation of a coalition government, with senior positions divided among the parties. Given long-standing tensions between ZANU-PF and the MDC, many observers continue to express skepticism that the parties truly share power. Initial reforms by the current government have stemmed Zimbabwe's runaway inflation rate and stabilized the economy, but significant challenges to the country's recovery remain. South Africa has led regional mediation efforts to address the parties' outstanding concerns. Both parties have agreed to hold national elections in 2012, although a date has yet to be set. The electoral process is expected to be tense. This report provides an overview of the transitional government and related recent developments. For additional information, see CRS Report RL32723, Zimbabwe: Background , by Lauren Ploch. In January 2009, prior to the formation of the transitional government, Zimbabwe was considered by some analysts to be a failed state. Dubbed "the world's fastest shrinking economy," Zimbabwe saw its Gross Domestic Product (GDP) decline over 50% between 2000 and 2009. After several years of hyperinflation, the country's official inflation rate had risen to a level at which prices doubled in less than 24 hours. Zimbabwe's economy had effectively collapsed, a situation that President Mugabe has frequently blamed on Western sanctions. Critics contend Zimbabwe's economic troubles stem from years of poor governance and mismanagement. Today, Zimbabwe continues to face serious political and economic challenges. Over 90% of the population lacks formal employment. Life expectancy for Zimbabweans has fallen significantly in the past 20 years, in part due to a high HIV/AIDS prevalence rate. Some 7 million Zimbabweans required food aid in early 2009, and, while the situation has since improved, localized food insecurity persists. The breakdown of the country's dilapidated water and sewage systems contributed to an outbreak of cholera in late 2008 that resulted in several thousand deaths and infected almost 100,000. In 2009, over half the population had little or no access to safe drinking water or sanitation. Despite over $50 million in subsequent donor interventions to rehabilitate these systems, the risk of waterborne disease remains high, with one in three rural Zimbabweans still lacking access to clean drinking water. More than 3 million people are estimated to have emigrated in the last decade, including up to half of the country's doctors and nurses. Many hospitals and clinics continue to lack medicines, supplies, and functioning equipment. The public education system has suffered a major decline. Teachers receive wages that are a fraction of those earned by their regional counterparts. Repeated threats by teachers and other civil servants to strike for higher wages continue to pose a challenge for the transitional government as it struggles to raise state revenues to address competing budget priorities. Flawed elections in 2008 and subsequent months of widespread political violence left the country's political rivals bitterly at odds. At that time, the government of Zimbabwe, considered to be authoritarian by the U.S. State Department and others, found few allies in the international community; several countries, including Botswana, refused to recognize its legitimacy. Questions surrounding the legitimacy of the Zimbabwe government in the wake of the March and June 2008 elections (see Appendix ) left the country mired in political uncertainty for the remainder of that year. President Mugabe delayed the swearing-in of the new parliament and the naming of a new cabinet as South African President Thabo Mbeki and other international leaders pressed for talks between the parties. When the parliament was sworn in on August 25, Lovemore Moyo from Tsvangirai's faction of the MDC (known as MDC-T) was elected speaker. On September 15, 2008, after several weeks of negotiations overseen by Mbeki, Mugabe and Tsvangirai signed a power-sharing arrangement, the Global Political Agreement (GPA), to resolve the political standoff by establishing a unity government and outlining a time frame for the drafting and adoption of a new constitution. As part of the deal, Tsvangirai would become prime minister in a new unity government, and cabinet positions would be divided among the parties. Mugabe, who remains head of state under the arrangement, would lead the cabinet, but Tsvangirai, as chair of a new Council of Ministers, would be responsible for the day-to-day management of government affairs. Early reports claimed that Tsvangirai would gain control of the police force, while Mugabe would retain control of the armed forces. The text of the agreement, however, left the oversight of the police, which falls under the Ministry of Home Affairs, undetermined, and ZANU-PF refused to relinquish the position. In the months after the agreement was signed, the MDC accused the government of abducting and torturing over 40 opposition and civil society leaders, including human rights activist Jestina Mukuko. Her whereabouts were unknown for three weeks before she was presented in court on charges of treason (see " Human Rights Abuses " below). Southern African leaders continued to call on the parties to implement the agreement and to share the Home Affairs Ministry, but Tsvangirai, citing the continued harassment of his colleagues, declared the deal to be unworkable. After Mugabe announced plans to name a new cabinet with or without Tsvangirai's participation, Southern African leaders renewed efforts to bring the parties together, and on January 31, amid reports of significant internal debate among the MDC leadership, Morgan Tsvangirai announced that he would join Mugabe in a transitional coalition government. On February 11, 2009, Morgan Tsvangirai was sworn in as the prime minister of Zimbabwe. Arthur Mutambara, representing the smaller MDC faction (known as MDC-M), was sworn in as a deputy prime minister, as was MDC-T vice president Thokozani Khupe. The positions were created as part of a constitutional amendment approved unanimously by the legislature to formalize the coalition government and the GPA. The controversial Ministry of Home Affairs, which oversees the police service, is now co-chaired by an MDC and a ZANU-PF minister, but the MDC's ability to affect change within the police, still led by a ZANU-PF loyalist, remains in question. The MDC factions gained control of several key ministries, including Finance, Public Service, Water, Energy and Power Development, Public Works, Health, Education, Commerce, and State Enterprises, which oversees parastatals. The party expressed its intention to use the Ministry of Constitutional and Parliamentary Affairs to press for its goal of constitutional reform. Despite the MDC's purported role as a co-equal partner in government, the parties have been unable to reach agreement on several outstanding reforms demanded by donors. Critics of the previous regime suggest that Mugabe and his allies did not enter into this government in good faith. International donors have repeatedly stated that a resumption of significant aid will depend on both economic and democratic reforms, the restoration of the rule of law, and a demonstrated respect for human rights. Without an influx of considerable foreign funds, many analysts suggest Zimbabwe will struggle to return its economic and social indicators to pre-crisis levels. The duration of the coalition government was not explicitly defined in the power-sharing agreement, and a considerable amount of political uncertainty regarding the government's future remains. The GPA, now enshrined in Zimbabwe's constitution, outlined a time frame of 18 months for the drafting of a new constitution and a nationwide referendum. Elections are expected to be held several months after the planned referendum, but a timeline for the polls was not provided in the GPA. The contentious constitutional drafting process is behind schedule and elections are now unlikely to occur before mid-2012, if not in 2013. The following section explores reforms made under Zimbabwe's transitional government and examines several of the challenges to economic recovery and greater political stability. Zimbabwe's current finance minister, senior MDC official Tendai Biti, has been credited with initiating critical economic reforms that have led to positive economic growth for the first time in years. Inflation has remained at single digit levels since 2009. The International Monetary Fund (IMF) and others suggest that reforms on the macroeconomic front are encouraging, but the situation remains fragile. The IMF estimates decelerated growth in 2011, however, barring further policy corrections. The adoption of hard currencies (predominantly the U.S. dollar and the South African rand) stabilized prices in 2009 and stemmed a previously rampant inflation rate. The local currency has become effectively worthless. The "dollarization" of the economy, combined with the elimination of price controls, allowed shopkeepers to restock their shelves with basic goods in 2009, but the cost of living remains high.