US embassy cable - 04HARARE1281

UNCLAS HARARE 001281 
 
SIPDIS 
 
STATE FOR AF/S 
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, EAGR, EINV, PGOV, ZI 
SUBJECT: Mid-Year Budget Statement Is Nonevent 
 
 
1. Summary: Acting Finance Minister Herbert Murerwa\'s mid- 
year speech offered neither recognition of Zimbabwe\'s 
exporter crisis nor innovative prescriptions.  Once 
again, the beleaguered Finance Ministry has punted the 
ball to Reserve Bank Governor Gideon Gono.  End summary. 
 
Adjustment for Bracket Creep 
---------------------------- 
2. For ordinary Zimbabweans, the only noteworthy aspect 
of Murerwa\'s statement was his elevation of income tax 
brackets, a semiannual ritual in this high-inflation 
environment.  The GOZ\'s Herald led today with this item 
under the overextended headline, \"Non-Taxable Income Up.\" 
The GOZ raised the low bracket threshold from Z$ 200,000 
to 750,000/month (US$37-140) and the high bracket 
threshold from Z$375,000 to 1,500,000/month (US$70-280). 
Although Murerwa and the Herald vaguely characterized the 
adjustment as tax relief, it merely accounts for 
inflationary bracket creep since December. Additionally, 
the GOZ tinkered with duty on a few imports, most notably 
lowering or removing taxes on commercial or public 
transport vehicles.  Murerwa made only timid references 
to fiscal restraint, probably too little to satisfy the 
markets. 
 
Comment 
------- 
3. Speaking obliquely and often in passive voice, Murerwa 
further toed the GOZ line by implying Zimbabwean exports 
were increasing (measures \"are greatly improving 
viability and capacity to export\") and the GOZ was paying 
down its arrears to international lending bodies (\"some 
payments are being made\").  Still, Murerwa and the 
Finance Ministry professional staff obviously realize a) 
inflationary bracket realignment is not tax relief, b) 
exports are falling rapidly, and c) recent GOZ payments 
to the International Monetary Fund are insignificant. 
Yet Murerwa, who has served twice as Finance Minister, is 
unwilling to help Zimbabweans confront uncomfortable 
facts.  We will see if Gono is more up to the task when 
he delivers his monetary policy update. 
 
Weisenfeld