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Cablegate: Zimbabwe's Fiscal Transparency

VZCZCXRO3025
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0032 0201538
ZNR UUUUU ZZH
P 201538Z JAN 10
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC PRIORITY 5318
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHAR/AMEMBASSY ACCRA 3265
RUEHDS/AMEMBASSY ADDIS ABABA 3376
RUEHBY/AMEMBASSY CANBERRA 2633
RUEHDK/AMEMBASSY DAKAR 3003
RUEHRL/AMEMBASSY BERLIN 1799
RUEHKM/AMEMBASSY KAMPALA 0064
RUEHNR/AMEMBASSY NAIROBI 0066
RUEHGV/USMISSION GENEVA 2534
RUEAIIA/CIA WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/EUCOM POLAD VAIHINGEN GE
RHEFDIA/DIA WASHDC
RHEHAAA/NSC WASHDC

UNCLAS HARARE 000032

SIPDIS
SENSITIVE

AF/S FOR B.WALCH
DRL FOR N.WILETT
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
STATE PASS TO USAID FOR J.HARMON AND L.DOBBINS
STATE PASS TO NSC FOR SENIOR AFRICA DIRECTOR M.GAVIN

E.O. 12958: N/A
TAGS: AID EAID ECON EFIN PREL ZI
SUBJECT: ZIMBABWE'S FISCAL TRANSPARENCY

REF: STATE 1923

1. The USG provides no direct funding to Zimbabwe's central
government. But USG funding does support provision of assistance to
specific elements of the Government of Zimbabwe (GOZ). This
includes substantial assistance under the PEPFAR program to
government-led efforts combating HIV/AIDS, assistance through an NGO
to the Prime Minister's office, assistance through the UNDP to the
effort to reform the constitution, and assistance through partners
to the national legislature. Although assistance to Zimbabwe is
subject to restrictions under U.S. legislation, all activities are
covered by existing authorities or appropriate waivers.

2. Formal dollarization of Zimbabwe's economy in 2009 significantly
improved the GOZ's fiscal transparency.
Now that the Zimbabwe dollar no longer circulates, the Reserve Bank
of Zimbabwe (RBZ) cannot finance GOZ expenditures, thus forcing the
Ministry of Finance to operate on a cash basis. This has eliminated
the ad-hoc fiscal habits that previously made GOZ spending almost
entirely opaque.

3. The demise of the Zimdollar also ended the large-scale
quasi-fiscal activities of the RBZ, which in some years has exceeded
the GOZ's official budget. While the RBZ did direct financial
support to some state-owned enterprises in 2009, this amounted to a
small fraction of total GOZ expenditure. Furthermore, the GOZ has
reported to the International Monetary Fund (IMF) the details of
this activity, which has since ceased.

4. The GOZ's budget is available to the public. Following the
Finance Minister's annual presentation of the budget to Parliament,
the GOZ publishes estimates of expenditure by agency, broken down
into major categories. The published budget also includes revenue
estimates by source. Daily newspapers also publish the budget
estimates, and the Ministry of Finance posts them on its website.

5. As long as the GOZ is confined to cash budgeting, the published
budget serves as a reliable upper bound for actual expenditure.
Revenue estimates in the 2010 budget may be somewhat optimistic, but
the GOZ's interim public reports on revenue performance over the
course of the year are likely to be reliable. Management of revenue
flows through state-owned enterprises remains a concern, however.
The Ministry of Finance does not have direct control over all
enterprises in which the GOZ owns shares, and financial reports
published by these companies are not always complete, timely, or
reliable.

6. Beginning in March 2009, Zimbabwe's transitional government has
worked to restore order to public-sector expenditure. The Ministry
of Finance, in particular, has been broadly successful in
re-asserting formal control over the work of the RBZ. In addition,
the GOZ has had external support that has improved fiscal
transparency. This has included technical support from the IMF,
which resumed in May 2009. Additionally, from the African
Development Bank and through a multi-donor trust fund administered
QDevelopment Bank and through a multi-donor trust fund administered
by the World Bank, the GOZ receives technical support to improve its
public financial management system. These efforts include
installation of new budgeting software and staff training.

RAY

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