Search

 

Cablegate: Banks Eye Parallel Market

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

UNCLAS HARARE 001420

SIPDIS

STATE FOR AF/S
USDOC FOR AMANDA HILLIGAS
TREASURY FOR OREN WYCHE-SHAW
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON

E. O. 12958: N/A
TAGS: ECON ETRD EINV PGOV ZI
SUBJECT: Banks eye parallel market

1. Summary: In spite of the GOZ's strong-armed efforts
to enforce a fixed (auction) rate, local businesses tell
us parallel currency trading is becoming more widespread.
NMB now discreetly offers its best customers access to
the parallel market. End summary.

Zimdollar expensive at any rate
-------------------------------
2. Business-to-business weekend trading generally took
place within a Z$7,800-8,500/US$ band. Because the
parallel exchange is still covert and untransparent, many
traders offered unwitting smaller clients as little as
Z$6,200/US$. Although the higher-end parallel exchange
nets about 40 percent more than the official rate, it
still overvalues the zimdollar by any historic purchasing
parity measure. Inflation, for example, has registered
360 percent since August 2003, while today's rate is
nearly identical to that of one year ago (Z$5600:US$ on
Aug 22, 2003 vs. Z$5602:US$ at last Thursday's auction).
Zimbabwe has become an expensive place to do business, so
much so that Coca-Cola now considers Johannesburg a
cheaper venue. As a cost-cutting measure, the firm is
relocating its top Zimbabwean executives from depressed
Harare to the southern African business hub.

3. GOZ enforcement requires parallel traders to adopt
extreme precautions. We have seen traders rely on
multiple levels of intermediaries; we have heard them
speak in code over phone lines. Finance Minister Chris
Kuruneri remains behind bars, however, as a grim but
symbolic deterrent to parallel trading and foreign
exchange externalization. We understand repeat-offender
NMB has again begun to tempt its best customers with
parallel exchange rates, the first commercial bank to do
so since January.

Comment
-------
4. Reserve Bank (RBZ) Governor Gideon Gono vilifies
parallel traders as economic saboteurs. Actually, they
enhance his potency. Since most prices for goods and
services reflect the parallel exchange, Gono can offer
select importers amplified profit margins by granting
them discounted access to foreign exchange at the
official rate. (The RBZ formally dismisses most
unsuccessful forex applications with a single word -
"cause." There is no further explanation.) In effect,
Gono has created a subsidy for privileged importers
through an indirect exporter tax.

Sullivan

© Scoop Media

 
 
 
World Headlines

 


Myanmar: UN Condemns Escalating Violence In Deadliest Day Of Protests So Far

In response to the killing of at least 18 protesters demonstrating against Myanmar’s military coup, the UN human rights office (OHCHR) on Sunday together with the UN chief, strongly condemned the “escalating violence” and called for an immediate end to the use of force... More>>

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>>


Focus On: UN SDGs


UNFCCC: Greater Climate Ambition Urged As Initial NDC Synthesis Report Is Published

UN Climate Change today published the Initial NDC Synthesis Report, showing nations must redouble efforts and submit stronger, more ambitious national climate action plans in 2021 if they’re to achieve the Paris Agreement goal of limiting global temperature rise by 2°C—ideally 1.5°C—by the end of the century... More>>


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 webtv.un.org 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>>