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Cablegate: Zim Notes August 8, 2008

VZCZCXRO6571
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0675/01 2211453
ZNR UUUUU ZZH
R 081453Z AUG 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 3274
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2039
RUEHAR/AMEMBASSY ACCRA 2209
RUEHDS/AMEMBASSY ADDIS ABABA 2328
RUEHRL/AMEMBASSY BERLIN 0860
RUEHBY/AMEMBASSY CANBERRA 1605
RUEHDK/AMEMBASSY DAKAR 1963
RUEHKM/AMEMBASSY KAMPALA 2384
RUEHNR/AMEMBASSY NAIROBI 4815
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1477
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 HARARE 000675

SIPDIS

AF/S FOR G. GARLAND
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN
TREASURY FOR D.PETERS AND T.RAND
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN
COMMERCE FOR BECKY ERKUL

E.O.12958: N/A
TAGS: PGOV PREL ASEC PHUM ECON EAGR EFIN EMIN ZI
SUBJECT: ZIM NOTES AUGUST 8, 2008

-------------
1. SUMMARY
-------------

Topics of the week:

- Negotiations Continuing
- OFDA Director Visit
- Price Controls Re-Imposed on Tourism
- Coins No Remedy for Cash Shortage
- Scramble for Alternative Banknote Supplier
- "Homegrown Solutions" - the Fuel Couponization of Zimbabwe's
Economy
- Corrigendum
- Cartoon of the Week
- No Comment...

--------------------------------------------- ---------
2. Price Movements-Exchange Rate and Selected products
--------------------------------------------- ---------

Parallel rate for cash shot to Z$350billion ($35 revalued):US$1
against inter-bank average of Z$9 (revalued):US$1

Bank transfer rose to Z$850 billion ($85 revalued):US$1; official
rate unchanged

Bread on the parallel market rose to Z$250 billion ($25 revalued)

Sugar steady at Z$350 billion (Z$35 revalued)/2kg

Cooking oil rose to Z$300 billion (Z$30 revalued)/750ml

Petrol and diesel more than doubled to Z$540 billion (Z$54
revalued)/liter

-----------------------------
On the Political/Social Front
-----------------------------

3. Negotiations Continuing...South African president Thabo Mbeki is
expected in Harare August 9 or 10 to facilitate one-on-one talks
between Zimbabwean president Robert Mugabe and MDC president Morgan
Tsvangirai. The principal unresolved issue is the distribution of
power between Mugabe as president and Tsvangirai as prime minister.
Other issues include the transitional constitution, the size of
cabinet and allocation of ministries, the future role of the
security chiefs, and the nature and extent of amnesty. If an
agreement is reached, it is expected to be signed next week. See
Harare 661, 669, 674.

4. OFDA Director Visit... USAID's Director of the Office of U.S.
Foreign Disaster Assistance (OFDA), Ky Luu, visited Harare, Zimbabwe
July 29-31 to consult with humanitarian organizations, UN agencies,
donor representatives, and Zimbabwean citizens regarding the crisis
in the country. The timing of his trip was particularly opportune,
as Zimbabwe's humanitarian community has been operating under a
restrictive and threatening environment in the post-March 29
election period. Luu's interactions and analysis led to a statement
released by USAID Administrator Fore calling on the GOZ to rescind
its ban on NGO field activities and create conditions suitable for
humanitarian organizations to resume work safely and constructively.
USAID is discussing a series of moves toward a strategic plan of
action on the humanitarian situation. See Harare 663, and for
Fore's statement, go to:
http://www.usaid.gov/press/releases/2008/ps08 0731.html

--------------------------
Economic and Business News

HARARE 00000675 002 OF 002


--------------------------

5. Price Controls Re-Imposed on Tourism... In a hastily arranged
meeting this week to explain the reintroduction of price controls in
the tourism sector, the chairman of the National Incomes and Pricing
Commission (NIPC), Goodwills Masimirembwa, accused players of
profiteering through the use of the bank-transfer exchange rate
rather than the agreed inter-bank rate in pricing products and
services. The President of the Zimbabwe Council for Tourism, Chipo
Mutasa, expressed disappointment, highlighting the industry's
position at the tail end of the value chain and its consequent
inability to control costs. Masimirembwa proposed a new system
whereby players would apply individually for price increases so that
the NIPC could identify "pockets of abuse" in the value chain.

6. Coins No Remedy for Cash Shortage... The reintroduction of coins
that had been taken out of circulation in 2006, and the introduction
of some new coins (highest denomination Z$2.5 billion old value),
are likely to fuel the growth in money supply further--in the short
term, at least. We learned that the Reserve Bank provided Cargill
with Z$100 quadrillion (old value) solely in coins this week to meet
the company's cash purchases of cotton.

7. There is an apparent shortage of cash in the economy. Most
banks do not have enough resources and securities to enable them to
get sufficient cash from the RBZ every day. Unable to meet their
customers' demand for cash, the banks still have long lines at their
branches every day.

8. Scramble for Alternative Banknote Supplier... Having lost its
regular supplier of banknote paper and issued a new revalued
currency in a hyperinflationary environment, the GOZ is scrambling
to locate an alternate secure paper supplier. See Harare 672.

9. "Homegrown Solutions" - the Fuel Couponization of Zimbabwe's
Economy... Already widely traded as a stable-even
appreciating-shadow currency as the value of the local currency
swoons, the GOZ approved use of BP and Caltex fuel coupons at an
inaugural private "Auction by Barter" today where "executive
vehicles," trucks and other vehicles will go under the hammer under
the auctioneer's slogan "Tough Times - New Ideas!"

10. Corrigendum... Last week's ZimNotes on the FEWSNet Executive
Overview of Food Security should have read that Zimbabwe's national
cereal deficit is "just over one million metric tons," not "just
over one metric ton."

----------
No Comment
----------

11. August 1, 2008 The Herald:

"The Reserve Bank of Zimbabwe has donated ... for the sitting judges
(of the High Court)...16 top of the range Mercedes Benz E 280 ...
32-inch plasma screen televisions and a full set of satellite dishes
each .... Apart from the top-of-the-range Mercedes Benz, the judges
also have utility vehicles which include Toyota IMV and Isuzu
trucks, courtesy of the Central Bank. (Master of the High Court)
Mr. Nyatanga said it was not desirable for judges to drive Mercedes
in rough terrain going to their farms."

MCGEE

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