US embassy cable - 05HARARE760

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000760 
 
SIPDIS 
 
DEPT FOR U/S BURNS; AF A/S NEWMAN/DAS WOODS; OVP FOR 
NULAND; NSC FOR ABRAMS, COURVILLE; 
 
E.O. 12958: DECL: 05/27/2015 
TAGS: ECON, ETRD, PGOV, PHUM, PREL, ZI, Economic Policy, Food Assistance, Restore Order/Murambatsvina, U.S.-Zimbabwe Bilateral Relations 
SUBJECT: GONO LAYS IT ON THICK 
 
Classified By: Classified by Ambassador Dell, reasons 1.4 (b) (d) 
 
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Summary 
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1. (C) Reserve Bank Governor Gideon Gono told the Ambassador 
June 1 that the GOZ wanted western financial assistance and 
better relations with the U.S. and the UK.  The GOZ was 
prepared to play by global economic rules, including honoring 
bilateral investment agreements, and was prepared to 
negotiate compensation with commercial farmers who lost land 
as a result of GOZ,s land reform policies.  The Ambassador 
responded that the GOZ,s recent crack down on the informal 
economy was sending a different message and that we would 
respond appropriately to positive GOZ policy changes ) 
political as well as economic.  That said, we were prepared 
to provide food assistance if needed and requested.  End 
Summary. 
 
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RBZ Monetary Policy 
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2. (C) Gono said the business community might have complained 
publicly that the devaluation of the Zimdollar to 9000 was 
insufficient but privately they were thanking him (N.B. The 
parallel rate has held steady this week at roughly 25,000. 
This reflects the lack of trading activity in light of the 
government crack down on the informal sector rather than 
increased confidence in the Zimdollar.)  With the subsidies 
he had established, Gono claimed Zimbabwean exporters would 
once more be competitive internationally.  However, he would 
have been able to consider a steeper devaluation if he had 
greater reserves or international financial support.  To that 
end, Gono said his May 19 presentation had a message in it 
for the international community, including the IMF, which was 
due in Harare next week for Article Four consultations: 
Zimbabwe would once more play by the global economic rules. 
This meant adhering to bilateral investment agreements, not 
just with respect to land but for all investments. 
 
3. (C) Gono said it also meant that the GOZ had agreed &in 
principle,8 at his instigation, to compensate commercial 
farmers who had lost their land as part of the land reform 
program.  The compensation would be limited to improvements 
to the land.  His discussions with various farmer,s unions, 
including Justice for Agriculture (JAG) and the Commercial 
Farmer,s Union (CFZ), had established a baseline figure of 
USD 4 billion in compensation claimed.  Gono said this would 
be the starting point for negotiations, though obviously the 
GOZ,s resources were much less.  He added that he had also 
successfully argued in favor of inviting back commercial 
farmers with badly needed skills.  In that regard, Gono noted 
that the next target of the government crack down would be on 
the farms, where the government could not, for instance, 
allow squatters to take over coffee plantations and tear them 
up to grow maize to the detriment of the national economy. 
This was part of a larger GOZ plan to restore agricultural 
productivity, including through completion of many irrigation 
projects, as the foundation for rebuilding the economy. 
 
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Operation Restore Order 
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4. (C) The Ambassador said the U.S. welcomed greater emphasis 
on agricultural productivity, which could indeed be the 
foundation of economic recovery in Zimbabwe.  However, we saw 
little evidence that Zimbabwe was embracing global economic 
rules or sound economic policies.  The events of the past two 
weeks, especially the attack on the informal economy, seemed 
to us to be courting economic meltdown.  Gono said 
three-quarters of the cabinet had agreed the day before that 
Operation Restore Order had gone too far.  He personally felt 
that it could have been conducted with &more finesse.8  The 
GOZ was now reassessing the importance of the informal sector 
and would look for ways to regulate it rather than destroy 
it. 
 
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U.S. Relations 
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5. (C) Gono said the GOZ also had a message for the U.S.  The 
GOZ wanted the U.S. to use its influence with the UK to 
facilitate a rapprochement.  Zimbabwe wanted to turn a page 
in its relations with the UK and let bygones-be-bygones. 
Zimbabwe also wanted better relations with the U.S.  Gono 
said without U.S. support there was no chance that the IMF or 
other global financial institutions would provide economic 
assistance.  The Ambassador responded that U.S. policy was 
not based on past events but on current policies and that we 
would respond positively to positive changes in GOZ behavior 
) political and economic.  He added that there was no chance 
we would support IMF assistance absent those policy changes; 
in fact we would likely vote again in July to expel Zimbabwe 
from the organization since the GOZ had not used its two six 
month &reprieves8 to embrace a sound approach. 
 
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Food Assistance 
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6. (C) The Ambassador said regardless of our differences with 
the GOZ, the U.S. would respond if Zimbabwe needed food 
assistance this year.  While we would not play politics with 
food, our support was not unconditional.  The GOZ would have 
to formally ask for assistance at an authoritative level, 
though this need not be public.  It would also have to be 
fully transparent about what was needed, including full 
disclosure with respect to stocks and imports.  Finally, we 
would not allow the GOZ to politicize distribution and would 
insist that international NGOS be involved.  Gono promised to 
relay this to other GOZ officials. 
 
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Comment 
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7. (C) In an effort to make sense of this meeting, our report 
is probably overly coherent.  In fact, Gono was rambling, 
disjointed and defensive in the hour-long conversation.  He 
spent most of the time talking about side issues and 
irrelevancies, attempting to portray his policies as sound 
and effective.  They are neither.  He also seemed at pains to 
distance himself from the excesses of GOZ economic policies, 
especially the recent crack down, while still claiming 
authorship of those policies and implying that his status as 
the preeminent GOZ economic decision maker remains intact. 
In fact, he is clearly diminished in stature, especially 
compared to Joyce Mujuru, whose presence at his May 19 
announcement didn,t mark political support so much as the 
new pecking order. 
 
DELL