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Cablegate: Zimbabwe - Input for Congressionally-Mandated

VZCZCXRO0546
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0187 0701620
ZNR UUUUU ZZH
R 101620Z MAR 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 2566
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY

UNCLAS HARARE 000187

SIPDIS

SIPDIS

EEB/IFD/OMA ANDREW SNOW AND RICHARD FIGUEROA
AF/EPS ANN BREITER, ELLIOT REPKO
AF/S STEVE HILL

E.O. 12958: N/A
TAGS: EAID ECON PREL ZI
SUBJECT: ZIMBABWE - INPUT FOR CONGRESSIONALLY-MANDATED
REPORT ON FISCAL TRANSPARENCY

REF: STATE 0016737

1. In Zimbabwe, fiscal transparency and accountability exist
in principle but not in practice. There is a range of
legislation governing elements of government accounts,
including the Finance Act Chapter 23:04, which deals with
income tax, duties and license fees, and the Customs and
Excise Act Chapter 23:02 that deals with customs and duties.
In addition, the Government of Zimbabwe's (GOZ) budget is
publicized in a Budget Statement presented to Parliament
every year in the form of a Bill that Members of Parliament
have an opportunity to debate and approve. The Statement is
disseminated as a printed document, "the National Budget"
with accompanying Budget Estimates of Expenditure and Income
for the current and coming fiscal years. The Statement is
also published in the local press the day after presentation
in Parliament.

2. All revenues and expenditures are included in the
Statement, but in recent years, the Reserve Bank of Zimbabwe
(RBZ) has taken over many of the functions of government
through its quasi-fiscal activities, i.e. activities that
should ordinarily be undertaken by government, but in an
attempt to keep the budget deficit figures low, are not
reflected in government accounts. These activities include,
among others, deeply subsidized credit extended in an opaque
manner to farmers and industry. In the 2006 Budget, the
Minister of Finance at the time stated the GOZ's desire to
reduce these extra budgetary expenditures as a way of
controlling inflation, but quasi-fiscal activity has, in
fact, increased rather than diminished since then. Zimbabwe's
weakness on fiscal transparency is due primarily to a lack of
will, not necessarily lack of capacity, as quasi-fiscal
spending has become a tool of patronage.

3. In addition, the budget is eroded by hyperinflation before
revenue is collected or expended. (NOTE: The officially
acknowledged year-on-year rate of inflation was about 100,000
percent in January 2008; private estimates put the rate in
February at roughly three times that figure. END NOTE.) As
a result, the budget outturn on expenditure and income is
always much greater than the budget estimate. Consequently,
for the past several years, the GOZ has presented to
Parliament a supplementary budget which is invariably much
higher than the original budget.

4. There are no USG programs to strengthen Zimbabwe's
capacity to develop sound fiscal policies; the Government of
Zimbabwe falls under Brooke Amendment restrictions and USG
programs are limited to humanitarian assistance. The World
Bank has provided technical assistance in the past.

5. Zimbabwe volunteered for the World Bank to report on the
country's compliance with the World Bank-led Report on
Corporate Governance in December 2000. In the past ten years
Zimbabwe has not volunteered for the IMF or World Bank to
report on the country's compliance with any ROSCs covering
fiscal transparency.
MCGEE

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