US embassy cable - 04HARARE600

UNCLAS SECTION 01 OF 02 HARARE 000600 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR AMANDA HILLIGAS 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
E. O. 12958: N/A 
TAGS: ECON, EAID, BTIO, EINV, PGOV, ZI 
SUBJECT: Finance Minister Wants Slow Exchange Adjustment 
 
1. (SBU) Summary: Finance Minister Chris Kuruneri 
expressed satisfaction with recent International Monetary 
Fund (IMF) Article IV consultations.  However, he said 
the GOZ prefers a more gradual approach for rationalizing 
its overvalued currency and phasing out its hefty tax on 
exporters than the IMF delegation prescribed.  Kuruneri 
also acknowledged a grain deficit larger than 100,000 
metric tons and promised to stop the revenue authority 
from trying to tax expatriates at U.S. NGOs.  End 
summary. 
 
2. (SBU) Ambassador Sullivan, accompanied by the USAID 
mission director and econoff, paid an April 7 courtesy 
call on the newly appointed finance minister.  Kuruneri 
said he welcomed the visit and wanted better relations 
with the U.S.  He thanked the Ambassador for food and HIV 
assistance, and hailed traditional U.S. support for 
agriculture through, for example, the Wisconsin Land 
Tenure Center. 
 
Kuruneri characterizes IMF concerns 
----------------------------------- 
3. (SBU) Openly apprehensive about a pending IMF verdict 
in July, the Finance Minister cited numerous issues 
arising from consultations: 
 
- Market-Driven Exchange Rates. Kuruneri said he accepted 
the IMF prescription for converging auction and parallel 
rates, but wanted to move more gradually than the IMF 
suggested.  He considers the effect on exporters of the 
official Z$824:US$ rate less severe than the IMF. 
However, he reiterated that Reserve Bank (RBZ) Governor 
Gideon Gono will address exchange rate concerns in a 
follow-up policy statement, now postponed until late 
April. 
 
- Arrears Payments.  Kuruneri restated the GOZ's intent 
to remit US$1.5 million per quarter toward its IMF 
arrears (currently US$290 million).  The GOZ has 
restarted, then curtailed, these payments several times 
since 2001. 
 
- Sub-market Lending Rates.  He agreed with the IMF that 
a sub-market 30 percent lending rate for the productive 
sector (heavily negative in real terms) was fueling 
speculation.  Kuruneri stressed that the GOZ will soon 
cap the loan facility, turning it into a revolving fund. 
Rates will eventually move toward the market. 
 
- Parastatal Support.  Acknowledging that the Grain 
Marketing Board (GMB), National Oil Company of Zimbabwe 
(NOCZIM) and other parastatals are major budget drains, 
the Finance Minister concurred with the IMF 
recommendation that State-owned firms rationalize pricing 
as soon as possible.  The 2004 budget called for similar 
measures. 
 
Land Reform, Taxation of NGO Expats 
----------------------------------- 
4. (SBU) In addition, Kuruneri admitted: 
 
- The GOZ made mistakes in redistributing land.  Himself 
a land-reform beneficiary, Kuruneri predicted 
optimistically that 2004/05 yields could equal those of 
the late-1990s. 
 
- The country's food deficit will exceed those of recent 
GOZ estimates.  He said he would urge the Ministers of 
Agriculture and Labor/Social Welfare to speed up an 
appeal to the donor community. 
 
- The revenue authority (ZimRA) had no right to tax 
expatriates working for U.S. NGOs.  He promised to speak 
with ZimRA officials. 
 
Comment 
------- 
5. (SBU) Despite ongoing embezzlement accusations against 
Kuruneri, the new minister clearly comes down on the 
moderate side of the GOZ.  He is more outspoken than his 
predecessor, Herbert Murerwa, but remains overshadowed by 
flamboyant RBZ Governor Gono.  At the same time, Kuruneri 
shares the same logic-chopping biases of other ZANU-PF 
stalwarts.  He understates the devastating effect on 
exporters of the overvalued zimdollar and overstates the 
potential for a near-term agricultural rebound.  On the 
whole, however, he is probably among the more reasonable 
cabinet ministers. 
 
Sullivan