Cablegate: Zimbabwe Economic Crises Update

This record is a partial extract of the original cable. The full text of the original cable is not available.





E. O. 12958: N/A
SUBJECT: Zimbabwe Economic Crises Update

Ref: Harare 1762

1.(SBU) Summary: We offer the following thumbnail update
of Zimbabwe's principal economic crises. Since reftel,
the GOZ has made progress on fuel and banknote shortages,
but inflation is worsening. End Summary.

Banknote Shortage
2.(SBU) Through the GOZ euphemistically calls its new
larger denomination banknotes "bearer checks," most
Zimbabweans would gladly believe that up is down if it
means they can have money again. While their cash
languished in banks, inflation swallowed over one percent
of its value each day. Happily, merchants have accepted
the larger notes with hardly a glitch.

Overvalued Currency
3.(SBU) No progress, with the parallel rate holding at
Z$5650:US$1, about 7-times the official rate. When the
GOZ devalued from Z$55 to 824:US$1 in February (and
promised further quarterly reviews), the official rate
had floated up to more than half the parallel rate. Our
next parallel market slide lurks no doubt around the
corner. Exporters are up-in-arms about exchanging half
their earnings to the Reserve Bank at the low official
rate, a policy that is eating away at one of Zimbabwe's
sole remaining forex sources. According to unconfirmed
press reports, President Mugabe has been adamant in
refusing cabinet requests for further devaluations.

4.(SBU) Closely related to the Zimdollar's plummeting
value, inflation continues on the upswing. Currently,
the Central Statistical Office pegs it year-on at 427
percent. The local International Monetary Fund office
forecast last November of 523 percent year-end inflation
appears uncannily accurate. Since the GOZ introduced the
new larger denomination banknotes on Sept 17, retail
prices have risen rapidly, perhaps by as much as 20
percent. Public transport in Harare has also jumped from
Z$300-600 to Z$400-1,000 in the past fortnight. With few
salaries keeping pace with inflation, Zimbabweans without
a forex source just get poorer.

Rationalizing Land Reform
5.(SBU) There's clearly no snappy ending to this ordeal.
Our contacts - including farming companies, Ministry of
Agriculture officials and various farmer groups -
universally doubt a GOZ commitment to make land reform
work. The GOZ will not even publish (let alone act upon)
the much-ballyhooed Utete Commission report, which was
supposed to chart a path out of the land reform chaos.
Consider the problems: (a) Both large- (A2) and small-
scale(A1) farms still form unviable economic models; (b)
the GOZ has made no effort to agree on a compensation
schedule for dispossessed farmers, the quickest route to
a restoration of title-deed and rule-of-law; (c) and
President Mugabe's two-week ultimatum for multiple-farm
recipients to return all but one farm seems to have
passed unheeded by all but a handful. Worst of all, land
invasions continue.

Fuel Shortage
6.(SBU) The GOZ has raised the controlled fuel price from
Z$ 1,170 to 1,980. Yet although it has escalated 29-fold
(from Z$69) this year, the controlled price does not
leave downstream oil companies sufficient room for
profit. The leaded-fuel street price now runs ZS 2,200
to 2,700. On the other hand, the GOZ is not presently
punishing most gas stations that sell above the
controlled price. We witnessed several TOTAL stations
outside Harare selling openly at Z$ 2,200 this week.
Should this lax enforcement continue, we believe all gas
stations will soon ignore the controlled price, signaling
the conclusion of Zimbabwe's fuel crisis.

7. (SBU) Despite progress on the banknote and fuel
fronts, the GOZ has not returned to the modest economic
reform course it began in February. Escapism is still
the order of the day. The GOZ blames bad economic times
on fabricated Western trade sanctions. Then it couches
its piecemeal reform in language that disguises the
actual policy, where banknotes become "bearer checks" and
devaluation an "export support mechanism." Until this or
a future GOZ is able to confront the real causes of
Zimbabwe's economic decline, we do not expect meaningful


© Scoop Media

World Headlines


Syria: Economic Decline, Rising Hunger And Surging Humanitarian Needs

Syria’s fragile economy has “suffered multiple shocks” over the past 18 months, with its currency plummeting and joblessness swelling as people struggle to cover their basic needs, the UN Emergency Relief Coordinator told the Security Council ... More>>

OECD: Final Quarter Of 2020 Shows Continued Recovery In G20 International Merchandise Trade

G20 international merchandise trade continued to rebound in the fourth quarter of 2020 ( exports up 7.2% and imports up 6.8%), following the sharp falls seen in the first half of 2020, as lockdown measures affected trade globally. Although growth ... More>>

UN Report: Civilian Casualties Surged After Peace Talks Began In Afghanistan

Monitoring by the UN Assistance Mission in Afghanistan, UNAMA, and the UN Human Rights Office has revealed that despite a drop in civilians killed and injured overall in 2020 there was a rise in civilian casualties following the start of peace negotiations ... More>>

Focus On: UN SDGs

2021: Critical Year To ‘reset Our Relationship With Nature’ – UN Chief

During this time of “crisis and fragility”, the UN chief told the United Nations Environment Assembly on Monday that human well-being and prosperity can be vastly improved by prioritizing nature-based solutions. Painting a picture of the turmoil ... More>>

Paris Agreement: UN Secretary-General António Guterres To Mark U.S. Reentry With Envoy For Climate John Kerry

Watch live at UN Secretary-General António Guterres will join U.S. Special Presidential Envoy for Climate John F. Kerry at an event marking the United States’ reentry into the Paris Agreement this Friday. The discussion with the Secretary-General ... More>>

WeBeliev: Scoop In Conversation With Abhishek Sinha, Founder Of WeBeliev, An NZ Crowdfunding Platform

WeBeliev supports 17 SDGs, launching sector specific campaigns every month Q. What is WeBeliev and why did you start it? A. WeBeliev is a Singapore-registered crowdfunding platform aimed at fundraising for all the 17 Sustainable Development Goals (SDGs) ... More>>