US embassy cable - 00HARARE5677

BLEAK WORLD BANK ASSESSMENT OF PROSPECTS FOR GOVERNMENT OF ZIMBABWE IMPLEMENTING SOUND ECONOMIC POLICIES

Identifier: 00HARARE5677
Wikileaks: View 00HARARE5677 at Wikileaks.org
Origin: Embassy Harare
Created: 2000-10-09 12:55:00
Classification: CONFIDENTIAL
Tags: PGOV PHUM EAGR PREL EAID ZI
Redacted: This cable was not redacted by Wikileaks.
This record is a partial extract of the original cable. The full text of the original cable is not available.



                           CONFIDENTIAL     PTQ2478

PAGE 01        HARARE  05677  01 OF 02  091255Z 
ACTION AF-00    

INFO  LOG-00   NP-00    AGRE-00  AID-00   AMAD-00  ACQ-00   CIAE-00  
      DODE-00  SRPP-00  DS-00    EB-00    EUR-00   VC-00    H-01     
      TEDE-00  INR-00   IO-00    LAB-01   L-00     VCE-00   AC-01    
      NSAE-00  OIC-02   OMB-01   OPIC-01  PA-00    PM-00    PRS-00   
      ACE-00   P-00     SP-00    IRM-00   STR-00   USIE-00  PMB-00   
      DSCC-00  PRM-01   DRL-02   G-00     NFAT-00  SAS-00     /010W
                  ------------------8F52F2  091255Z /38    
FM AMEMBASSY HARARE
TO SECSTATE WASHDC PRIORITY 7309
INFO NSC WASHDC PRIORITY
DEPT OF TREASURY WASHDC
USDOC WASHDC
SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
C O N F I D E N T I A L SECTION 01 OF 02 HARARE 005677 
 
SIPDIS 
 
NSC FOR SENIOR AFRICA DIRECTOR GAYLE SMITH 
USDOC FOR DHENKE-ROGERS 
LONDON FOR CGURNEY 
PARIS FOR BISA WILLIAMS 
PASS USAID FOR AFR/SD - DWELLER, AFR/SA - CPALMA, 
NNEWMAN, AA/AFR - VNEWTON, AND A/AID - RMCCALL 
 
PASS USTR - ROSA WHITAKER 
 
E.O. 12958: DECL 10/06/10 
                       CONFIDENTIAL 
 
PAGE 02        HARARE  05677  01 OF 02  091255Z 
TAGS: PGOV, PHUM, EAGR, PREL, EAID, ZI 
SUBJECT: BLEAK WORLD BANK ASSESSMENT OF PROSPECTS FOR 
GOVERNMENT OF ZIMBABWE IMPLEMENTING SOUND ECONOMIC 
POLICIES 
 
CLASSIFIED BY AMB MCDONALD.  REASONS 1.5 (B) AND (D). 
 
1. (C) SUMMARY: DESK OFFICER, IN HARARE ON AN 
ORIENTATION TRIP, AND ECONOFF MET WITH ROGIER VAN DEN 
BRINK, WORLD BANK DEPUTY RESIDENT REPRESENTATIVE AND 
SENIOR ECONOMIST IN HARARE ON OCTOBER 5 TO OBTAIN HIS 
PERSPECTIVE ON THE ECONOMIC SITUATION IN ZIMBABWE.   VAN 
DEN BRINK MADE CLEAR DURING THE MEETING THAT THE 
GOVERNMENT OF ZIMBABWE (GOZ) WAS NOT TAKING THE STEPS 
NECESSARY TO RESOLVE THE COUNTRY'S SERIOUS ECONOMIC 
PROBLEMS.  JUST THIS WEEK, ZIMBABWE WAS PLACED IN NON- 
ACCRUAL STATUS BY THE WORLD BANK FOR NOT MAKING PAYMENTS 
FOR SIX MONTHS.  THIS STATUS PUTS ZIMBABWE AT THE BOTTOM 
RANKING OF COUNTRIES WITH THE WORLD BANK, INCLUDING 
LIBERIA, IRAQ, AND BURMA.  VAN DEN BRINK DOES NOT EXPECT 
ANY DRAMATIC CHANGES IN ECONOMIC POLICIES FROM THE GOZ, 
BECAUSE TOP GOZ OFFICIALS VIEW ZIMBABWE'S ECONOMIC 
PROBLEMS AS LARGELY BEING THE RESULT OF A BRITISH 
CONSPIRACY.  END SUMMARY. 
 
--------------------------------- 
ALL WORLD BANK PROJECTS SUSPENDED 
--------------------------------- 
 
2. (C) ROGIER VAN DEN BRINK, THE WORLD BANK'S DEPUTY 
RESIDENT REPRESENTATIVE IN HARARE, TOLD DESK OFFICER AND 
                       CONFIDENTIAL 
 
PAGE 03        HARARE  05677  01 OF 02  091255Z 
ECONOFF ON OCTOBER 5 THAT ALL EIGHT OF THE WORLD BANK'S 
PROJECTS IN ZIMBABWE HAVE BEEN SUSPENDED BECAUSE OF NON- 
PAYMENT, AND ZIMBABWE HAS ENTERED INTO NON-ACCRUAL 
STATUS.  THIS PLACES ZIMBABWE AT THE BOTTOM OF THE WORLD 
BANK RATING SYSTEM FOR FINANCIAL WORTHINESS, IN THE 
COMPANY OF STATES SUCH AS LIBERIA, IRAQ, AND BURMA, AND 
MEANS THAT ZIMBABWE IS NOW LARGELY ISOLATED FROM 
INTERNATIONAL FINANCING.  VAN DEN BRINK SAID HIS OFFICE 
WAS NOT CURRENTLY PURSUING NEW STRATEGIES TO HELP THE 
GOZ OUT OF ITS CURRENT DIRE ECONOMIC PLIGHT, AS THE GOZ 
KNOWS THE ECONOMIC ACTIONS THAT NEED TO BE TAKEN, BUT IS 
NOT TAKING THEM. 
 
---------------------- 
DOING EVERYTHING WRONG 
---------------------- 
 
3. (C) VAN DEN BRINK STATED THAT THE GOZ MILLENIUM 
ECONOMIC RECOVERY PLAN WAS NOT WELL THOUGHT OUT, AND 
THAT ACTIONS ARE BEING TAKEN BY THE GOZ FOR POLITICAL 
REASONS THAT ARE FURTHER DAMAGING THE ECONOMY.  THESE 
INCLUDE THE FAILURE TO MOVE FORWARD ON PRIVATIZATION OF 
PARASTATALS, THE MUSHROOMING GOVERNMENT DEFICIT, AND 
ARTIFICIALLY SUPPRESSING THE INTEREST RATE TO SPUR 
ECONOMIC GROWTH.  HE INSISTED THAT THE MINISTRY OF 
FINANCE ECONOMIC TEAM KNOWS WHAT NEEDS TO BE DONE FOR A 
SOUND ECONOMIC PROGRAM, BUT APPARENTLY IS BEING 
PREVENTED FROM TAKING CRUCIAL STEPS BY OTHER MINISTERS 
AND PRESIDENT MUGABE. 
 
----------------------------- 
                       CONFIDENTIAL 
 
PAGE 04        HARARE  05677  01 OF 02  091255Z 
DEVALUATION OF THE ZIM DOLLAR 
----------------------------- 
 
4. (C) AN EXAMPLE OF COUNTERPRODUCTIVE ACTIONS BEING 
TAKEN BY THE GOZ IS THE CRACKDOWN ON THE PARALLEL 
CURRENCY MARKET.  VAN DEN BRINK STATED THAT RIGHT AFTER 
THE GOZ DEVALUED THE ZIM DOLLAR FROM 36:1 TO 50:1, THE 
GOZ CRACKED DOWN ON THE PARALLEL MARKET, WHERE THE ZIM 
DOLLAR HAD BEEN TRADING AT BETWEEN 63:1 AND 65:1 AND 
WHERE 70 TO 80 PERCENT OF ALL FOREIGN CURRENCY 
TRANSACTIONS WERE OCCURRING.  ACCORDING TO VAN DEN 
BRINK, THIS ACTION RESULTED IN AN INCREASE IN THE 
VALUATION OF THE ZIM DOLLAR FOR THE MAJORITY OF 
INDIVIDUALS AND COMPANIES INVOLVED IN FOREIGN CURRENCY 
EXCHANGE WHO HAD BEEN USING THE PARALLEL MARKET, AS THEY 
NOW HAD TO GET THE ZIM DOLLAR AT THE OFFICIAL RATE OF 
50:1 VERSUS THE PRIOR PARALLEL MARKET RATE OF 63-65:1. 
 
--------------------------------- 
COULD AN MDC GOVERNMENT DO BETTER 
--------------------------------- 
 
5. (C) WHEN ASKED IF HE THOUGHT THE OPPOSITION PARTY 
MOVEMENT FOR DEMOCRATIC CHANGE (MDC) WOULD DO A BETTER 
 
                       CONFIDENTIAL 
 
                           CONFIDENTIAL     PTQ2479 
 
PAGE 01        HARARE  05677  02 OF 02  091255Z 
ACTION AF-00 
 
INFO  LOG-00   NP-00    AGRE-00  AID-00   AMAD-00  ACQ-00   CIAE-00 
      DODE-00  SRPP-00  DS-00    EB-00    EUR-00   VC-00    H-01 
      TEDE-00  INR-00   IO-00    LAB-01   L-00     VCE-00   AC-01 
      NSAE-00  OIC-02   OMB-01   OPIC-01  PA-00    PM-00    PRS-00 
      ACE-00   P-00     SP-00    IRM-00   STR-00   USIE-00  PMB-00 
      DSCC-00  PRM-01   DRL-02   G-00     NFAT-00  SAS-00     /010W 
                  ------------------8F52F8  091255Z /38 
P 091255Z OCT 00 
FM AMEMBASSY HARARE 
TO SECSTATE WASHDC PRIORITY 7310 
INFO NSC WASHDC PRIORITY 
DEPT OF TREASURY WASHDC 
USDOC WASHDC 
SOUTHERN AFRICAN DEVELOPMENT COMMUNITY 
 
C O N F I D E N T I A L SECTION 02 OF 02 HARARE 005677 
 
SIPDIS 
 
NSC FOR SENIOR AFRICA DIRECTOR GAYLE SMITH 
USDOC FOR DHENKE-ROGERS 
LONDON FOR CGURNEY 
PARIS FOR BISA WILLIAMS 
PASS USAID FOR AFR/SD - DWELLER, AFR/SA - CPALMA, 
NNEWMAN, AA/AFR - VNEWTON, AND A/AID - RMCCALL 
 
PASS USTR - ROSA WHITAKER 
 
E.O. 12958: DECL 10/06/10 
                       CONFIDENTIAL 
 
PAGE 02        HARARE  05677  02 OF 02  091255Z 
TAGS: PGOV, PHUM, EAGR, PREL, EAID, ZI 
SUBJECT: BLEAK WORLD BANK ASSESSMENT OF PROSPECTS FOR 
GOVERNMENT OF ZIMBABWE IMPLEMENTING SOUND ECONOMIC 
POLICIES 
 
JOB OF MANAGING THE ECONOMY, VAN DEN BRINK WAS DOUBTFUL. 
HE STATED THAT THE MDC PLAN FOR ECONOMIC REFORM IS "MORE 
IMF THAN THE IMF'S PLAN", BUT HE QUESTIONED WHETHER THE 
MDC WOULD HAVE THE POLITICAL SUPPORT TO IMPLEMENT IT. 
VAN DEN BRINK BELIEVES THAT THE WHITE ZIMBABWEAN 
BUSINESS COMMUNITY THAT SUPPORTS THE MDC, AND RECOGNIZES 
THE NEED FOR MAJOR STRUCTURAL CHANGES IN THE ECONOMY, 
HAS NO REAL POLITICAL POWER.  THE MDC'S REAL POWER IS 
STILL TO BE FOUND IN THE LABOR UNION MOVEMENT FROM WHICH 
IT EMERGED, AND LABOR LIKELY WOULD OPPOSE MUCH OF THE 
MDC'S CURRENT ECONOMIC PLAN WERE THE PARTY TO GAIN 
POWER. 
 
---------------------- 
ANTI-MUGABE CONSPIRACY 
---------------------- 
 
6. (C) VAN DEN BRINK STATED THAT PRESIDENT MUGABE AND 
MANY GOZ MINISTERS BELIEVE THAT ZIMBABWE'S CURRENT 
ECONOMIC PROBLEMS AND THE FAILURE OF THE IMF AND WORLD 
BANK TO PROVIDE NEEDED FINANCIAL ASSISTANCE ARE ALL PART 
OF A BRITISH CONSPIRACY TO FORCE MUGABE TO RESIGN.  VAN 
DEN BRINK BELIEVES THAT IN THIS POLITICAL CLIMATE IT IS 
IMPORTANT THAT THE USG BE CAREFUL IN ITS STATEMENTS ON 
ZIMBABWE SO AS NOT TO GIVE THE GOZ FODDER FOR USING IT 
AS A SCAPEGOAT FOR ITS OWN ECONOMIC PROBLEMS.  HE ALSO 
                       CONFIDENTIAL 
 
PAGE 03        HARARE  05677  02 OF 02  091255Z 
CAUTIONED THAT THE MDC HAS TO BE CAREFUL IN WHAT IT 
SAYS, BECAUSE HE BELIEVES THAT MUGABE AND THE GOZ ARE 
LOOKING FOR AN EXCUSE TO LAUNCH A VIOLENT CRACKDOWN ON 
THE MDC OR TO IMPOSE MARTIAL LAW. 
 
7. (C) COMMENT: THE RESREP'S COMMENTS ON THE FUNDAMENTAL 
STRUCTURAL PROBLEMS OF THE ZIMBABWEAN ECONOMY WERE RIGHT 
ON TARGET AND HIS ANALYSIS OF THE COUNTERPRODCUTIVE 
RESULTS OF SOME OF THE GOZ'S ECONOMIC RECOVERY PLAN 
ACTIONS WERE INSIGHTFUL.  IT IS CLEAR THAT THE GOZ IS 
FAILING TO ADDRESS THE FUNDAMENTAL STRUCTURAL PROBLEMS 
OF THE ECONOMY, AND AS A RESULT THE ECONOMIC SITUATION 
IS LIKELY TO CONTINUE TO WORSEN IN THE NEAR TERM.  THE 
FACT THAT ZIMBABWE HAS NOW FALLEN TO THE BOTTOM OF THE 
WORLD BANK RATING SYSTEM, IN THE SAME CATEGORY AS 
LIBERIA, IRAQ, AND BURMA, IS COMPELLING EVIDENCE OF HOW 
BAD THE GOZ'S ECONOMIC MISMANAGEMENT HAS BECOME.  END 
COMMENT. 
 
MCDONALD 
 
                       CONFIDENTIAL 
 
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