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Cablegate: Goz Promises Floating Exchange Rate to Imf

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: GOZ Promises Floating Exchange Rate to IMF

Sensitive but unclassified. Not for Internet posting.

1. (SBU) Summary: International Monetary Fund (IMF)
Africa Director Abdoulaye Bio-Tchane said Reserve Bank of
Zimbabwe (RBZ) Governor Gideon Gono indicated he has set
September 2005 as the target month for introducing market-
determined exchange and interest rates. End summary.

2. (SBU) Accompanied by Assistant Africa Director
Sharmini Coorey, Bio-Tchane met the Ambassador on Nov 17
to seek out our views on economic and political
developments. Bio-Tchane also met with President Mugabe
on Nov 16, but the IMF official characterized this
session as unremarkable. Bio-Tchane noted that he had
met earlier with the British Ambassador, who said his
country was cautiously prepared to reengage with Zimbabwe
if discussions were not limited to assistance alone but
also encompassed the full range of democracy, governance
and human rights issues.

3. (SBU) Amb Dell said U.S. policy more or less
paralleled that view. He added, however, that as long as
the GOZ continues to engage in repressive tactics and
undermine multiparty democracy, there would be real
constraints on our ability to reengage with Zimbabwe.
The Ambassador also expressed concern about the tactics
and timing of the IMF process leading to a decision on
Zimbabwe's compulsory withdrawal from the Fund. It would
hand Mugabe a cheap propaganda victory on the eve of
elections if an Executive Directors' vote in favor of
withdrawal fell short of the required 85 percent level at
the Fund's Board. One could easily imagine headlines
here crowing about "IMF Approval for Mugabe's Policies."
Thus, we need to be either very confident we could see
the process through successfully or manage it to avoid a
wrong outcome before elections here. In a separate
conversation later that evening, RBZ Deputy Governor Nick
Ncube acknowledged that the GOZ's US$ 5 million quarterly
payments toward its IMF arrears were mere "tokens."

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4. (SBU) Bio-Tchane deferred the IMF's own assessment of
Zimbabwe's economy until the conclusion of an upcoming
staff visit, which Coorey will head in early December.
However, Bio-Tchane volunteered that he urged GOZ
officials to place more emphasis on fiscal controls, i.e.
cutting public spending. Bio-Tchane said Gono assured
him the GOZ would move to market-determined interest and
exchange rates by September 2005. Bio-Tchane and Coorey
disavowed government media reports that they "hailed the
ongoing economic reforms" and were "happy with the
progress made so far." They also denied assertions in
the GOZ's Herald that the IMF has established a forecast
of 5.2 percent GDP growth for 2005. In his post-visit
press release, Bio-Tchane offered no appraisal of Gono's
economic policies to date.

5. (SBU) Comment: Although Bio-Tchane was guardedly non-
committal in advance of December's technical assessment,
he seemed to look upon the GOZ's much-ballyhooed recovery
with skepticism. The IMF official also appeared mildly
dismissive of the GOZ's current official inflation rate
of 209 percent. On the other hand, we have no doubt the
GOZ seeks to gain maximum political mileage from this
"economic turnaround," trumpeted almost daily in the
state media. Referring to the IMF's upcoming decision on
Zimbabwe's compulsory withdrawal, the Nov 18 Herald
editorial proclaimed: "We. . . expect the IMF Executive
Board to give the thumbs-up to the country." Without
doubt, the GOZ will spin non-expulsion as endorsement of
its economic management, providing a handy campaign plank
for March's parliamentary electio

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