US embassy cable - 05HARARE569

C O N F I D E N T I A L HARARE 000569 
 
SIPDIS 
 
AF/EX 
AF/S FOR BNEULING 
EB/IFD FOR FCHISHOLM 
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE 
TREASURY FOR OREN WYCHE-SHAW, STATE PASS USAID FOR MARJORIE 
COPSON 
ALL AFRICAN DIPLOMATIC POSTS 
 
E.O. 12958: DECL: 12/31/2009 
TAGS: ECON, ETRD, PGOV, ZI, EINV, Economic Situation 
SUBJECT: FOREX DEMAND EXPLODES 
 
Classified By: Ambassador Christopher Dell for reasons 1.4 b/d 
 
1. (C) Summary:  Importer demand for foreign exchange through 
official channels is setting new records.  Traders continue 
to migrate to the parallel markets, where the zimdollar now 
trades at US$16,000:US$, down from Z$8,000:US$ in November. 
End Summary. 
 
2. (C) Demand at the Reserve Bank (RBZ),s twice-weekly 
auctions soared to a record US$197 million on Monday.  The 
RBZ continues to offer importers only US$11 million at each 
auction.  The RBZ turned back 8,063 of 8,136 bids for 
discounted foreign exchange, a refusal rate of over 99 
percent.   The auction rate remains around Z$6,100:US$. 
 
3. (C) Trading on the illegal but increasingly tolerated 
parallel currency markets has been brisk.  A trader told 
Econoff today he now pegs the buy/sell midpoint at 
Z$16,000:US$.   We estimate that nine of ten gas stations in 
Harare are dry today, a consequence of the fuel importers, 
inability to acquire forex at RBZ auctions. 
 
4. (C) Comment:  With almost no reserves and miniscule 
inflows from remaining exports, the RBZ is powerless to prop 
up the country,s currency.   It is even possible that the 
RBZ is selling less than US$11 million at each auction, since 
it does not publish a list of auction winners.  In our view, 
the GOZ will have to devalue the zimdollar significantly or 
accept a vibrant parallel market.  We do not believe an 
official rate stronger than Z$12,000:US$ would arrest the 
zimdollar,s plunge and indecisive move of this kind could 
cause a further stampede on the zimdollar as confidence in 
its worth erodes further. 
Dell