US embassy cable - 03HARARE1655

UNCLAS HARARE 001655 
 
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: Scapegoating of Reserve Bank Intensifies 
 
 
1. Summary:  Although the Government's daily Herald has 
cast blame in many corners for the country's cash 
shortage, its recent attacks on the Reserve Bank (RBZ) 
have been frenzied and unrelenting.  This makes little 
sense, but then in today's Zimbabwe, what does?  End 
Summary. 
 
Latest Villain? 
--------------- 
2. At times, the Herald has fingered private banks, cross- 
border traders, the opposition party and Asian merchants. 
However, the newspaper's denunciations of the Reserve 
Bank have now reached fever-pitch.  Wednesday's Herald 
began with the article, "RBZ bosses told to quit," 
carrying charges from various ruling ZANU-PF legislators. 
Only due to RBZ's asset mismanagement, the article 
charged, does Zimbabwe have a forex shortage.  A follow- 
up editorial in Thursday's Herald called again for top 
RBZ managers to resign.  It complained:  " . . . 
authorities at the central bank just watch with folded 
arms as if everything is normal . . . Indeed, it seems we 
have a bunch of myopic top RBZ management, which has 
failed to keep pace with the ever-changing domestic and 
international markets. . . We expect the current senior 
management to do the honorable thing of quitting." 
 
Comment 
------- 
3. By any measure, the Herald's RBZ bashing is bizarre. 
Neither the Herald nor the RBZ enjoys a modicum of 
autonomy from President Mugabe and his inner-circle.  The 
Herald is no more an independent newspaper than RBZ is an 
independent central bank. 
 
4. While it is conceivable there is genuine policy rift 
within the GOZ, this is hard to fathom.  The RBZ so 
loyally toes the GOZ line that we cannot remember a 
central bank governor or other high official disagreeing 
publicly with government policy or pronouncements.  (The 
RBZ has not defended itself against recent allegations.) 
There are several reason why the RBZ printed too few 
banknotes:  a) Contrary to common economic sense, the RBZ 
based inflation projections on the GOZ's insistence last 
November that 2003 inflation would run 96 percent (it's 
currently 400 percent); b) Each Z$500 (US$.10) banknote, 
the highest denomination, costs many times more to print 
than it is worth.  The Reserve Bank lacks resources to 
play this game forever; c) Finally, the RBZ is unable to 
print larger denominations - the obvious solution - 
because the GOZ refuses to accept its currency's broad 
devaluation, a consequence of failed economic policies. 
If anything, the RBZ's blind adherence to dotty GOZ 
policies caused Zimbabwe's cash crisis. 
 
Sullivan