US embassy cable - 00HARARE2895

C O N F I D E N T I A L HARARE 002895 
 
SIPDIS 
 
STATE FOR AF, AF/S, AF/EPS, EB/IFD/ODF 
TREASURY FOR ED BARBER, GRACE SONE 
USDOC FOR ERIC HENDERSON 
STATE PASS USTR/RWHITTAKER 
NSC FOR SENIOR AFRICA DIRECTOR GAYLE SMITH 
 
E.O. 12958: DECL: 05/31/10 
TAGS: EFIN, PGOV, ZI 
SUBJECT: ZIMBABWE'S ARREARS TO THE WORLD BANK 
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CLASSIFIED BY ECON/COMM OFFICER MARK PROKOP, REASONS 
1.5 (B), (D) 
 
REF: HARARE 2817 
 
1.  (C) ECON OFFICER RECENTLY LEARNED FROM THE WORLD 
BANK'S RESIDENT REPRESENTATIVE THAT ZIMBABWE'S 
ARREARS TO THE IBRD AS OF MAY 29 TOTALED 
APPROXIMATELY U.S.$18 MILLION.  INSTALLMENT PAYMENTS 
FROM ZIMBABWE TO THE BANK ARE DUE FORTNIGHTLY, AND 
ARE USUALLY IN THE U.S. $4 TO $5 MILLION RANGE, 
THOUGH SOME PAYMENTS CLIMB TO $8 OR $9 MILLION, 
DEPENDING ON THE REPAYMENT SCHEDULES OF PREVIOUS 
LOANS.  ANOTHER PAYMENT WAS DUE ON MAY 30, WHICH 
WOULD BRING THE NOW 75 DAYS IN ARREARS TOTAL TO 
APPROXIMATELY $23 MILLION. 
 
2.  (C) DUE TO THE PLEDGING OF A LARGE SHARE OF THE 
TOBACCO SALES EXPORT RECEIPTS FOR FUEL AND ENERGY 
PAST-DUE BILLS (REFTEL), THE HARD CURRENCY SHORTAGE 
PERSISTS AT NEAR CRISIS LEVELS AND IT IS NOT EXPECTED 
TO EASE ANYTIME SOON.  THEREFORE, WE ANTICIPATE THAT 
THE GOZ WILL HAVE DIFFICULTY MAKING THESE PAYMENTS, 
THE MORE SO AS THE BALANCE INCREASES.  ACCORDING TO 
THE WORLD BANK RESREP, GOVERNMENT OFFICIALS SEEM 
RELATIVELY NONPLUSSED ABOUT THE ARREARAGE, WITH THE 
RESERVE BANK GOVERNOR STATING THAT THOUGH HE IS DOING 
HIS BEST, EVEN HE CANNOT GET BLOOD FROM A TURNIP. 
 
3.  (C) WHEN ASKED WHAT THE OUTLOOK WAS FOR 
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RESUMPTION OF LENDING AND FURTHER FINANCIAL SUPPORT, 
THE RESIDENT REPRESENTATIVE STATED THAT AFTER THE 
ELECTIONS DIALOGUE WOULD HAVE TO START AFRESH WITH A 
CABINET WITH NEW MEMBERS, AND A DETERMINATION MADE 
THEN ON WHETHER OR NOT THE TWO BRETTON WOODS 
INSTITUTIONS WOULD EVEN WANT TO REENTER THE MARKET 
HERE.  "A LOT OF BAD THINGS CAN HAPPEN BETWEEN NOW 
AND THEN, MATE" HE CONFIDED (THE RESREP IS AN 
AUSTRALIAN), "AND THE NEW GOVERNMENT CAN CONTINUE TO 
BE NON-COOPERATIVE."  HE CONTINUED THAT AS A 
NECESSARY FIRST STEP THE IMF WOULD HAVE TO GET GOZ 
AGREEMENT TO START A SHADOW PROGRAM, THAT WOULD NEED 
TO LAST AT A MINIMUM FOUR OR FIVE MONTHS.  TO SAVE 
TIME, THIS SAME PERIOD COULD BE USED TO WORK OUT THE 
TERMS AND PERFORMANCE CRITERIA OF A NEW IMF FACILITY. 
 
4.  (C) ONCE THE IMF GIVES THE GREEN LIGHT, THEN THE 
ALREADY-APPROVED AFRICAN DEVELOPMENT BANK FUNDS COULD 
BE RELEASED (APPROXIMATELY U.S. $45 MILLION), HE 
EXPLAINED, AND AT THE SAME TIME THE WORLD BANK AND 
THE EU COULD RESUME DISCUSSIONS ON THE PATH FORWARD. 
HOWEVER, HE POINTED OUT, IF THE ARREARS SITUATION 
CONTINUES OR WORSENS, THEIR HANDS WILL BE TIED.  THE 
WORLD BANK PLANS TO HOST A QUARTERLY ALL-DAY DONORS 
DISCUSSION ON MAY 31, AT WHICH THE FOREGOING TOPICS 
AND A HOST OF OTHER ISSUES WILL BE DISCUSSED IN 
DEPTH.  THE MISSION WILL BE REPRESENTED AT THAT 
GATHERING BY THE USAID DIRECTOR. 
 
MCDONALD 
 
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