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Cablegate: Zim Notes August 1, 2008

VZCZCXRO1257
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0654/01 2141232
ZNR UUUUU ZZH
R 011232Z AUG 08
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 3248
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2035
RUEHAR/AMEMBASSY ACCRA 2196
RUEHDS/AMEMBASSY ADDIS ABABA 2315
RUEHRL/AMEMBASSY BERLIN 0847
RUEHBY/AMEMBASSY CANBERRA 1592
RUEHDK/AMEMBASSY DAKAR 1950
RUEHKM/AMEMBASSY KAMPALA 2371
RUEHNR/AMEMBASSY NAIROBI 4802
RHEHAAA/NSC WASHDC
RHMFISS/EUCOM POLAD VAIHINGEN GE
RUEHGV/USMISSION GENEVA 1461
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHEFDIA/DIA WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 HARARE 000654

SIPDIS

AF/S FOR G. GARLAND
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN
TREASURY FOR D.PETERS AND T.RAND
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN
COMMERCE FOR BECKY ERKUL

E.O.12958: N/A
TAGS: PGOV PREL ASEC PHUM ECON EAGR EFIN EMIN ZI
SUBJECT: ZIM NOTES AUGUST 1, 2008

-------------
1. SUMMARY
-------------

Topics of the week:

- Negotiations to Resume
- Violence Continues
- U.S. Expands Financial Sanctions
- Newspapers Reduce Print Run
- Wildlife Poached
- Stop-Gap Measures in Latest Monetary Statement
- Technical Glitches in Broadcast of Gono's Statement
- Business Blasts Economic Policies
- Risk of Food Insecurity
- Harare's Water Woes Worsens
- Tax-Free Threshold Increased

--------------------------------------------- ---------
2. Price Movements-Exchange Rate and Selected products
--------------------------------------------- ---------

Parallel rate for cash moved to Z$150 billion:US$1 against
inter-bank average of Z$80 billion:US$1

Bank transfer rate slipped to Z$750 billion:US$1; official rate:
Z$$30,000:US$1

Bread on the parallel market went up to Z$200 billion vs. controlled
price of Z$400 million

Sugar rose to Z$350 billion/2kg vs. controlled price of Z$8
million/2kg

Cooking oil rose to Z$250 billion/750ml vs. controlled price of
Z$9.3 million/750ml

Petrol and diesel rose to Z$200 billion/liter vs. controlled price
of Z$60,000/liter

-----------------------------
On the Political/Social Front
-----------------------------

Negotiations to Resume... ZANU-PF and the MDC will resume
negotiations on August 3 in Pretoria. Progress is reportedly being
made with an agreement possible by the end of the week to form a
power-sharing government that will include Mugabe and Tsvangirai
with both having executive powers. See Harare 651.

Violence Continues... Despite the MOU between ZANU-PF and the MDC
that calls for a cessation to the violence, pockets of Zimbabwe
continue to experience violence and intimidation. In some villages,
people have been forced to pay ZANU-PF militias livestock, food, and
money to "atone" for their affiliation with MDC. In addition, the
Solidarity Peace Trust has issued a new report detailing political
events in Zimbabwe since the March 29 elections and the ongoing
political violence. http://www.solidaritypeacetrust.org/reports/
desperately_seeking_sanity.pdf See also Harare 652.

U.S. Expands Financial Sanctions... President Bush issued a new
Executive Order on July 25 expanding financial sanctions against
Zimbabweans involved in undermining democracy and committing human
rights violations. The Treasury Department also added new entities
to the list of sanctioned individuals. In response, many have
contacted the embassy both requesting clarification on their
transactions and proposing additional individuals and companies for
the list. The new E.O. is at:
http://www.whitehouse.gov/news/releases/2008/ 07/

HARARE 00000654 002 OF 003

N
HARARE 00000654 003 OF 003


foods earlier than normal. The report estimates that two million
Zimbabweans are at risk of food insecurity this year.

Harare's Water Woes Worsens... Further symptomatic of Zimbabwe's
crumbling infrastructure, the Zimbabwe National Water Authority
(ZINWA) is increasingly unable to maintain water supplies due to
pipe bursts, electricity blackouts and lack of chemicals. As a
result, most Harare suburbs are going for months without running
water. The Combined Harare Residents Association (CHRA) has warned
of serious looming health problems. It maintains that the decision
to create ZINWA was careless and misguided as the organization lacks
the capacity to run and manage urban water supplies. The recently
elected mayor of Harare, Muchadeyi Masunda, voiced similar
sentiments, and called for the City of Harare to take over the
function.

Tax-Free Threshold Increased... The government increased the
tax-free income threshold from Z$25 billion (US$0.20 before
revaluation) to Z$5 trillion (US$42) per month. While the benefit
to workers might appear to be immense, hyperinflation swiftly pushes
most formally employed workers up into the highest tax category
where earnings attract a marginal tax rate of 47.5 percent.

MCGEE

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