This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 HARARE 002192 
 
SIPDIS 
 
STATE FOR AF, AF/S, AF/EPS 
 
CDC FOR CDC/NCHSTP Eugene McCray, Gary West; CDC/OD Ross 
Cox, Steve Blount 
 
AID FOR Roxana Rogers, G/PHN/HN Paul DeLay, David Stantion; 
G/PHN/POP Mark Rilling, Carl Hawkins, Felice Apter; All 
HPNOs; AFR/SA Marjorie Copson; Anne Peterson, Assistant 
Administrator, Bureau for Global Health 
 
HHS FOR William Steiger 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: KHIV TBIO SOCI PGOV ZI
SUBJECT:  ZIMBABWE: GLOBAL FUND TO FIGHT AIDS, TUBERCULOSIS 
AND MALARIA 
 
SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY. NOT 
SUITABLE FOR INTERNET POSTING. 
 
¶1.  (U) The US Embassy, HHS/CDC and USAID have had a series 
of discussions on coordinating the US Government response to 
the HIV and AIDS crisis in Zimbabwe. One of the current 
discussions and concerns has been the use of Global Fund for 
AIDS, TB, and Malaria (GFATM) monies in Zimbabwe. 
 
¶2.  (U) Over the last two years the GOZ has established a 
fixed exchange rate of ZW$55:US$1. This is an artificial 
exchange rate that does not correspond to the market value 
and has created a severe shortage of foreign currency.  For 
example the current rate, (known as the "parallel market 
rate") which the US Government, most donors and the majority 
of import and export businesses use to exchange money, is 
approximately ZW$700:US$1. 
 
¶3.  (SBU) The GFATM has approved US $15m for Zimbabwe. 
However, we would have serious concerns if this money were 
brought into the country and exchanged at the fixed exchange 
rate, resulting in a loss of 90% of GFATM purchasing power. 
Due to the severe shortage of foreign exchange it is in the 
interest of certain elements of the GOZ to exchange at the 
fixed rate. 
 
¶4.  (U) As the largest contributor to the GFATM, it is in 
the interest of the USG and the GFATM to negotiate a 
favorable exchange rate. Two of the largest industries -- 
tobacco and the mining industry -- have negotiated higher 
rates. Even the GOZ Department of Customs and Excise is 
currently using an exchange rate of ZW$300:US$1 for import 
duty.  The UN Representative in Zimbabwe very recently 
issued a memorandum directing the UN agencies to immediately 
begin accounting for ZW$ transfers at a rate of ZW$322:US$1. 
If any currency conversion occurs from the GFATM resources, 
it would be critical that a floor be established at this `UN 
accounting rate of exchange.' 
 
¶5.  (SBU) In the views of the US Mission and other 
international agencies in Zimbabwe, an even better solution 
exists than to exchange at an intermediate, `blended' rate 
such as the UN accounting rate of exchange.  The optimal 
solution would be to re-program the grant resources to focus 
heavily or exclusively on critical international 
procurements of drugs, reagents, equipment, and the like. 
Those elements now are critical bottlenecks in the entire 
health system and the response to AIDS, TB, and malaria, and 
require foreign exchange.  This would completely avoid the 
complex and politically charged issue of a preferable rate 
of exchange being provided to GFATM, while local 
manufacturers, farmers, and others are restricted to the 
official but economically meaningless ZW$55:US$1 rate.  It 
would also achieve maximal efficiency and purchasing power 
of GFATM resources in Zimbabwe. 
 
¶6.  (SBU) However, and this is the key issue, the approach 
proposed in Paragraph 5 would require reprogramming the 
resources in the fund to allow GFATM to cover foreign 
exchange needs of Zimbabwe in its response to HIV/AIDS, TB, 
and Malaria.  The scope of work set out in the Zimbabwe 
application for GFATM calls for substantial work in country, 
such as training, workshops, local salaries, and many other 
elements that would require ZW$.  CDC and USAID will suggest 
through the Zimbabwe Country Coordinating Mechanism (CCM) 
that Zimbabwe propose to meet those local currency costs 
principally from GOZ resources, since the government, 
including Ministry of Health and the National AIDS Council 
(NAC), do have access to local currency, or by recruiting 
other partners to help meet those local currency needs.  The 
GFATM secretariat would need to understand and be supportive 
of such a redirection of Zimbabwe's GFATM grant resources to 
meet Zimbabwe's international procurement needs for the 
three diseases.  It would be reasonable and advantageous if 
GFATM, in return for this flexibility, required special 
financial management from Zimbabwe, including holding the 
funds in a special trust fund and use of an experienced 
international procurement agency to manage procurements. 
 
¶7.  (U) We also suggest that GFATM tighten requirements for 
governance of the fund resources by the CCM, seek 
independent letters of description of the process of the CCM 
from listed CCM members, and make independent contact with 
international members of the CCM (not just the Chair) by 
visiting staff of GFATM.  It would strongly support good 
governance of GFATM resources if GFATM secretariat strongly 
insisted on active CCM governance, in Zimbabwe and 
elsewhere, that involves open and transparent deliberation 
and decision-making involving international partners.  The 
effect of such an ongoing requirement by GFATM is not being 
experienced now at country level.  There is no evidence of 
any duplicity or bad intention, but MOH (the Minister is 
Chair of CCM) understandably slides into business as usual 
if there is no external pressure to maintain an open, 
consultative, innovative approach that truly draws upon 
active involvement of international partners. 
 
¶8.  (U) The GFATM was established in response to a call for 
new and innovative ways to increase levels of funding and 
their impact on fighting three devastating diseases. But 
allowing the GOZ to exchange their grant funds at the fixed 
rate Zimbabwe will not be meeting the intent of the GFATM to 
have the maximum possible effect in combating these 
diseases. Zimbabwe is at the epicenter of the AIDS pandemic 
with a third of the population infected with HIV. A 
favorable exchange rate will provide substantially more 
prevention, care and support programs to those desperately 
in need. Re-allocation of grant funds to meet critical 
foreign exchange procurement requirements for battling AIDS, 
TB, and malaria would constitute an even more powerful use 
of resources, and would necessarily involve GOZ supplemental 
commitment to meeting the local currency needs of the 
activities described in the successful Zimbabwe application. 
 
¶9.  (U) We seek assistance from USG addressees and GF 
participants to assure that GFATM secretariat would support 
proposals from the Government of Zimbabwe to reprogram 
originally proposed use of GFATM grant, lest CDC and USAID 
waste time and lose credibility with technicians in the MOH 
and NAC of Zimbabwe by suggesting that they submit a revised 
proposal. 
 
SULLIVAN