Its narrow streets, crowded Islamic architecture and harbour filled with Arab dhows hint at an age long since passed. But in Zanzibar's Stone Town it is equally possible to visit one of a dozen internet cafés or to follow live by satellite the latest sporting entertainment from around the globe.

The contrast is an indication of the deceptive qualities of Unguja and Pemba, the two islands that make up Zanzibar, the exotic image of which is often at odds with a complex past and troubled present.

For while Tanzania prides itself on a record of stability unrivalled almost anywhere in Africa, the political calm and promising economic outlook that prevail on the mainland stand in sharp contrast to the tension that dominates life in Zanzibar.

It is the most sustained crisis since the 1964 revolution, when the African majority overthrew the predominantly Arab aristocracy in a move that prompted the union with the islands' much larger mainland neighbour. All efforts to break an impasse between government and opposition rooted in controversial elections five years ago have failed.

The political outlook is also critical for the islands' economy, where tourism has grown strongly in recent years, generating revenue forecast by the Zanzibar Tourist Commission to reach $72m this year.

According to the terms of the union, Zanzibar enjoys a quasi-autonomous status within Tanzania, retaining its own legislature and presidency, as well as generous representation in the union parliament, where it elects 50 out of 232 seats, despite a population of just 1m out of a total for Tanzania estimated at about 32m.

But while the ruling Chama Cha Mapinduzi (CCM) has maintained its national political dominance since the end of one-party rule in the early 1990s, in Zanzibar the opposition Civic United Front (Cuf) has presented a much more potent challenge.

Indeed, the Cuf maintains that only massive fraud and vote rigging enabled President Salmin Amour and the CCM to remain in office. It is a position broadly supported by western donors, who have suspended aid programmes in Zanzibar since 1995 in protest at the conduct of the poll.

Protracted negotiations, brokered by the Commonwealth, produced an 11-point compromise agreement last August. It was reluctantly accepted by the opposition but is still yet to be ratified by the government.

With fresh elections due in October, the opposition is sounding increasingly belligerent. "Since 1995 we have asked people to remain calm, which is why peace has prevailed," says Ismael Jussa, adviser to Seif Shariff Hamad, the Cuf secretary-general and presidential candidate.

"But people will not accept a repeat of the events of five years ago. We have tried non-violence and it does not work. Now we say ngaringari - we will defend our rights."

In an indication of the potential for unrest, violence flared in January, when a long-running trial of 18 Cuf supporters on treason charges widely regarded as trumped-up, returned to court.

Diplomats, however, believe that fears of a looming confrontation may have eased as a result of a series of setbacks in recent months for President Amour, the man at the centre of the Zanzibar imbroglio. In February, his efforts to change the constitution to permit him to stand for a third term were thwarted. A subsequent manoeuvre to nominate a close associate as the CCM's presidential candidate was supported by the party's Zanzibar caucus, only to be rejected by the party's national committee.

Aman Abeid Karume, the CCM candidate and son of the first president after the 1964 revolution, is a conciliatory figure. Opponents acknowledge his more consensual approach but fear that if he were elected, efforts to reach out to rivals might be undermined by more fearful elements within the ruling party.

"What matters is not the person but the party," warns Mr Jussa. "The CCM is determined to cling to power by any means. Already, there have been signs that since he was adopted as candidate, Karume has been distancing himself from progressive policies, such as on the possibility of a coalition government after the October election."

A transparent electoral process could pave the way for a return to political stability and promote the prospects for economic recovery. Observers, however, note that the electoral commission remains the same as that associated with the 1995 controversy, while issues surrounding access to media, demarcation of constituencies, composition of the voters' roll and the conduct of the police remain unresolved.

"If he wants to rescue his place in history, Amour should play the statesman, ratify the Commonwealth deal, reform the electoral commission and release the 18," advises a European diplomat. "Unfortunately, there is little to indicate that he is yet prepared to contemplate such moves."

Failure to break the impasse now could awaken long suppressed racial and regional tensions with potentially explosive consequences from which the mainland could not easily stay immune.

A deterioration in the security situation might also threaten the growth of the tourism sector, which has helped to mitigate the decline of the islands' traditional clove and spice-based agricultural sector.

The Zanzibar Investment Promotion Agency (Zipa) estimates more than two- thirds of the 244 approved development projects, valued at around $400m, are tourism related. Other constraints on investment include allegations of smuggling, tax evasion, corruption and an overly bureaucratic system, for which Zipa makes few apologies.

"Foreigners complain, but we want to take the time to get things rights," says a Zipa spokeswoman. "We have had a bad experience in the past with speculators who bring no development."

Indeed, there are already concerns about the management of the sector, which is divided between low-cost backpackers and isolated, self-contained resorts that deposit little revenue. "Government plans to boost tourist numbers fivefold to 500,000 annually by 2020," says Ally Saleh, a prominent local journalist.

Politicians of all parties speak of the need for diversification and to develop Zanzibar as a trading and financial centre for east and southern Africa. The reality, however, is that the critical levers of economic policy remain with the union government on the mainland, which sets monetary and fiscal policies as well as Vat and other taxation rates.

"Zanzibar's room for manoeuvre is limited," admits a CCM supporter. "It is really a question of confidence in the competence and integrity of our leaders."