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Cablegate: Goz has No Money for Fuel

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

UNCLAS HARARE 002091

SIPDIS

STATE FOR AF/S
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
TREASURY FOR OREN WYCHE-SHAW
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON

E. O. 12958: N/A
TAGS: ECON EPET EINV PGOV ZI
SUBJECT: GOZ has no money for fuel

1. Summary: Oil parastatal NOCZIM has been unable to
import fuel for GOZ purposes over the past week. End
summary.

2. The fuel shortage is affecting Zimbabweans in a
variety of ways:

- The National Railway of Zimbabwe (NRZ), a critical cog
in the country's economic infrastructure, has cancelled
most departures. This increases freight and passenger
transport costs 3-5 fold.

- After boarding a flight, Air Zimbabwe told its Saturday
morning passengers bound for Bulawayo/Victoria Falls that
it had no fuel. They had to wait hours until the
beleaguered carrier could borrow fuel from another
airline.

- NOCZIM has cut fuel supplies for commuter vans, the
GOZ's method of subsidizing public transport. With few
vans running, morning and afternoon commutes to high-
density suburbs can take 3-4 hours. Embassy national
employees report they must sometimes settle for rides
with dozens of others in cargo beds of trucks. Desperate
commuters literally beg motorists for rides, occasionally
blocking traffic.

Comment
-------
3. Since Libya's TAMOIL halted shipments to Zimbabwe last
year, NOCZIM has been unable to offer subsidized fuel to
commercial and retail customers. Until last week,
however, the GOZ had managed to keep subsidized fuel
flowing to parastatals and, to a lesser degree, commuter
vans. The latest shortages may mean the GOZ is
experiencing greater difficulties making purchases in
hard currency, a consequence of falling export revenue.
GOZ policy discourages exports by requiring firms to
convert half their revenue at the official rate, a
current 43 percent effective tax. Land reform has also
taken its toll on export earnings from tobacco and other
crops.

4. The GOZ has generally prohibited parastatals from cost
recovery for services. Mostly, this policy stems from
the GOZ's unwillingness to recognize the zimdollar's
market exchange rate. The unsupported official rate
represents only 15 percent of the zimdollar's market
value. Therefore, charges for international phone calls,
railway service and electricity are well below parastatal
cost. The GOZ has subsidized these public services
through export revenue, cheap borrowing (interest rates
are over 300 percent negative) and donations (especially,
fuel from Libya and electricity from South Africa).
It's been a losing battle, and the GOZ has thus far
directed parastatals to cut services rather than price
them at or above cost.

Sullivan

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