Cablegate: Still Otherworldly Economic Policy
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS HARARE 001593
STATE FOR AF/S and AF/EX
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON
E. O. 12958: N/A
TAGS: ECON EINV PGOV ZI
SUBJECT: Still Otherworldly Economic Policy
1. Summary: Past-week events affirm the GOZ is still
committed to self-destructive economic policies. We
observe no GOZ reckoning of the economy's sorry state.
New Farm/Conservancy Acquisitions
2. Even while the so-called Utete Commission is
supposedly producing a roadmap to straighten out land
reform, the chaotic process lurches forward. The GOZ
continues to list new properties for acquisition. Many
new listings are nature conservancies, which hold zero
potential for crop farming. Meanwhile, political elites
are scurrying to hide their multiple acquisitions behind
relatives, protecting themselves from imposition of a one
man/one farm policy.
3. The Government continues to scapegoat any convenient
group for its inflation-driven banknote shortage.
Yesterday, the official press fingered Asian business
owners. The GOZ refuses to own up to the effects of
inflation on the M1 supply and print larger bills.
Instead, the Government wastes time and money producing
useless new travelers checks in larger denominations with
ridiculous fanfare. Checks were the lead story in
yesterday's Herald and subject of two - count `em -
Herald commentaries today, insisting that checks are
"ushering in a new era in the financial sector."
4. Yesterday's Herald also carried an article: "Zimbabwe
Maintains Glitter as Investment Destination." The piece
rejoices: "The current trend indicates that Zimbabwe is
one country which will produce positive figures this
year." FDI has declined from US$ 444 to 3 million in six
Interest Rate Debate
5. President Mugabe and other GOZ thinkers still argue
that the GOZ needs to reduce interest rates to spur
growth. With real rates currently 300-percent negative
and inflation spiraling out of control, this is economic
heresy. Zimbabweans' best investment remains borrowing
and converting to forex.
Please Don't Pay Us
6. Exporters tell us they are urging foreign customers to
withhold payment. At present, half of export revenue
must be exchanged with the Reserve Bank at Z$824:US$1,
twenty percent of the Z$4200:US$1 market rate. In hope
the GOZ will boost this unreasonable official rate (it
increased from Z$55 to 824:US$1 in February), exporters
often stupefy customers by insisting that they delay
7. As we have stated in the past, we do not believe the
GOZ will embark on genuine economic reform until it comes
to terms with the mass impoverishment its policies have
wrought. Many higher-ups admit to us privately that the
Government is destroying the economy, but almost none are
willing to confront Mugabe or go public.