US embassy cable - 04HARARE1900

UNCLAS HARARE 001900 
 
SIPDIS 
 
STATE FOR AF/S 
USDOC FOR ROBERT TELCHIN 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
SENSITIVE 
 
E. O. 12958: N/A 
TAGS: EFIN, ECON, ETRD, EINV, PGOV, ZI, Economic Policy 
SUBJECT: GOZ Promises Floating Exchange Rate to IMF 
 
Sensitive but unclassified.  Not for Internet posting. 
 
1. (SBU) Summary:  International Monetary Fund (IMF) 
Africa Director Abdoulaye Bio-Tchane said Reserve Bank of 
Zimbabwe (RBZ) Governor Gideon Gono indicated he has set 
September 2005 as the target month for introducing market- 
determined exchange and interest rates. End summary. 
 
2. (SBU) Accompanied by Assistant Africa Director 
Sharmini Coorey, Bio-Tchane met the Ambassador on Nov 17 
to seek out our views on economic and political 
developments.  Bio-Tchane also met with President Mugabe 
on Nov 16, but the IMF official characterized this 
session as unremarkable.  Bio-Tchane noted that he had 
met earlier with the British Ambassador, who said his 
country was cautiously prepared to reengage with Zimbabwe 
if discussions were not limited to assistance alone but 
also encompassed the full range of democracy, governance 
and human rights issues. 
 
3. (SBU) Amb Dell said U.S. policy more or less 
paralleled that view.  He added, however, that as long as 
the GOZ continues to engage in repressive tactics and 
undermine multiparty democracy, there would be real 
constraints on our ability to reengage with Zimbabwe. 
The Ambassador also expressed concern about the tactics 
and timing of the IMF process leading to a decision on 
Zimbabwe's compulsory withdrawal from the Fund.  It would 
hand Mugabe a cheap propaganda victory on the eve of 
elections if an Executive Directors' vote in favor of 
withdrawal fell short of the required 85 percent level at 
the Fund's Board.  One could easily imagine headlines 
here crowing about "IMF Approval for Mugabe's Policies." 
Thus, we need to be either very confident we could see 
the process through successfully or manage it to avoid a 
wrong outcome before elections here.  In a separate 
conversation later that evening, RBZ Deputy Governor Nick 
Ncube acknowledged that the GOZ's US$ 5 million quarterly 
payments toward its IMF arrears were mere "tokens." 
 
4. (SBU) Bio-Tchane deferred the IMF's own assessment of 
Zimbabwe's economy until the conclusion of an upcoming 
staff visit, which Coorey will head in early December. 
However, Bio-Tchane volunteered that he urged GOZ 
officials to place more emphasis on fiscal controls, i.e. 
cutting public spending.  Bio-Tchane said Gono assured 
him the GOZ would move to market-determined interest and 
exchange rates by September 2005.  Bio-Tchane and Coorey 
disavowed government media reports that they "hailed the 
ongoing economic reforms" and were "happy with the 
progress made so far."   They also denied assertions in 
the GOZ's Herald that the IMF has established a forecast 
of 5.2 percent GDP growth for 2005.  In his post-visit 
press release, Bio-Tchane offered no appraisal of Gono's 
economic policies to date. 
 
5. (SBU) Comment: Although Bio-Tchane was guardedly non- 
committal in advance of December's technical assessment, 
he seemed to look upon the GOZ's much-ballyhooed recovery 
with skepticism.  The IMF official also appeared mildly 
dismissive of the GOZ's current official inflation rate 
of 209 percent.  On the other hand, we have no doubt the 
GOZ seeks to gain maximum political mileage from this 
"economic turnaround," trumpeted almost daily in the 
state media.  Referring to the IMF's upcoming decision on 
Zimbabwe's compulsory withdrawal, the Nov 18 Herald 
editorial proclaimed: "We. . . expect the IMF Executive 
Board to give the thumbs-up to the country."  Without 
doubt, the GOZ will spin non-expulsion as endorsement of 
its economic management, providing a handy campaign plank 
for March's parliamentary electio