US embassy cable - 03HARARE1635

UNCLAS HARARE 001635 
 
SIPDIS 
 
STATE FOR AF/S 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR 2037 DIEMOND 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
E. O. 12958: N/A 
TAGS: ECON, EINV, PGOV, ZI 
SUBJECT: Govt Outlaws Large Cash Sums 
 
1. Summary: Zimbabwe's cash saga continues.  The GOZ has 
made it illegal for anyone to charge a premium for 
banknotes or possess Z$5 million (US$1,000). End summary. 
 
2. Meanwhile, the banknote crisis continues unabated. 
Supermarkets have a higher mark-up on banknotes than on 
any other product.  Throngs of accountholders lining up 
at banks for their Z$5,000-10,000 (US$1-2) daily 
allotment are commonplace.  The crisis has hit hardest 
Zimbabwe's lower-class.  As we've mentioned in other 
reporting, the Zimbabwe Confederation of Trade Unions 
(ZCTU) is weighing mass action to protest the GOZ's 
mismanagement of the country's narrow money supply.  The 
Reserve Bank has also just introduced Zimdollar travel 
checks as an alternative to money, but recipients must 
still cash these single-use checks at banks, a nearly 
impossible feat. 
 
3. Comment: Making large piles and the trading of cash 
illegal will do nothing to resolve the banknote shortage. 
Trading will continue clandestinely.  Most business 
transactions here are already illegal in some respect. 
In short, the GOZ is unwilling to acknowledge the 
Zimdollar's plummeting value.  The official press still 
talks occasionally of printing a Z$1,000 (US$.20) note, 
double the current Z$500 top bill, but the Reserve Bank 
would need to print at least a Z$10,000 (US$1) note to 
stay ahead of its rapidly depreciating currency.  The 
cost of printing any note under Z$10,000 is prohibitive. 
 
Whitehead