US embassy cable - 02HARARE942

UNCLAS SECTION 01 OF 02 HARARE 000942 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S, AF/EX, HR/OE 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR 2037 DIEMOND 
LONDON FOR CGURNEY 
PARIS FOR BISA WILLIAMS 
NAIROBI FOR PFLAUMER 
PASS USTR - ROSA WHITAKER 
RIO FOR WEISSMAN 
TREASURY FOR ED BARBER AND C WILKINSON 
 
E.O. 12958: DECL: N/A 
TAGS: ECON, EFIN, EAGR, ETRD, ZI 
SUBJECT: ZIMBABWE'S BALANCE OF PAYMENTS' OUTLOOK IS 
GRIM 
 
 
SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY. 
NOT FOR INTERNET POSTING. 
 
1.  (SBU) A shrinking economy (GDP has declined by 
about 25 percent since 1998), land resettlement, high 
inflation, an artificially pegged currency and weak 
mineral prices have combined recently to cause 
Zimbabwe's exports to contract sharply, with the 2001 
total down about 30 percent from their peak in 1997. 
With export earnings down so steeply and economic 
conditions so bad, the current food shortage could 
probably not have come at a worse time.  There are 
simply no Zimdollars in the budget, nor forex in the 
central bank, to buy food, the country's offshore 
credit standing is non-existent, the development aid 
tap is turned off, and its external arrears currently 
exceed US $1.3 billion.  The chart below provides gross 
trade data for last year and our best projections on 
trade flows for 2002. 
 
Top Export Categories (US$ millions) 
 
                    2001 Earnings       2002(Estimate) 
 
Tobacco             $643 (see note)     $465 
Manuf'd Exports     $534.7              $420 
Gold                $166                $140 
Other Mineral       $174                $150 
Horticulture        $68                 $52 
Other Agricultural  $62                 $50 
Tourism/Hunting     $28                 $18 
 
Gross Exports       $1,748              $1,034 
 
For.Dir. Investment $5.4                $0 (negative?) 
 
Note: (Previous Tobacco Earnings: 2000-$400.4, 1999- 
$334.5) 
 
 
Top Import Categories (US$ millions) 
 
                    2001 Outlay         2002(Estimate) 
 
Manufactured Goods  $1,495              $1,125 
Fuel                $300                $240 
Chemicals           $130                $100 
Electricity         $90                 $75 
Food                $45                 $450 
Debt Service (est'd)$200                $200 
 
Gross Imports       $2260               $2,190 
 
Gross Trade 
Surplus/(Deficit)   ($507)              ($1,156) 
 
2.  (SBU) The data, which is admittedly very rough and 
should be viewed as indicative, shows a gross shortfall 
last year of about US half a billion dollars, and an 
estimated shortfall in 2002 of about $1.2 billion. 
(The foreign arrears account provides a quick proxy 
check on these calculations; at year-end 2000 it was 
about US $800 million, and at year-end 2001 it was 
about $1.3 billion, an increase of $500 million.)  The 
very large balance-of-payments shortfall means that 
Zimbabwe has absolutely no chance of paying for 
necessary food imports, unless it strips the hard 
currency out of the economy, which will further damage 
it and accelerate the decline of GDP. 
 
3.  (SBU) Comment: This very basic analysis shows that 
Zimbabwe's economic woes are set to worsen, likely 
drastically and quickly.  Under a worst case scenario 
and if current trends are not reversed, in the span of 
five years starting at the end of 1998 the ZANU-PF 
leadership may very well succeed in halving Zimbabwe's 
GDP, dropping per capita income from the US $400 range 
to the $200 range.  This would place Zimbabwe on par 
with the likes of Laos, Togo, Bangladesh and Senegal. 
Whites in Zimbabwe constitute about 0.6 percent of the 
population, and about a third of those are commercial 
farmers.  Claiming that he is correcting injustices of 
race and land, Mugabe appears willing to inflict 
astounding damage on his black countrymen and their 
economic inheritance for his own self-interest.  This 
is the unfortunate stuff of legend.  End Comment. 
 
WHITEHEAD