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Viewing cable 03HARARE2302, Gono will speak on Dec 17

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Reference ID Created Released Classification Origin
03HARARE2302 2003-11-26 09:00 2011-08-24 16:30 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Harare 
This record is a partial extract of the original cable. The full text of the original cable is not available.

260900Z Nov 03
 
UNCLAS HARARE 002302 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR AF/S 
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER 
USDOC FOR 2037 DIEMOND 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
E. O. 12958: N/A 
TAGS: ECON EFIN EINV PGOV ZI
SUBJECT: Gono will speak on Dec 17 
 
Ref: Harare 2284 
 
1. (U) Summary: Zimbabwe's business community eagerly 
awaits incoming Reserve Bank (RBZ) Governor Gideon Gono's 
first policy statement, now scheduled for December 17. 
Most critical is where Gono comes down on currency 
markets. End Summary. 
 
2. (U) After Finance Minister Herbert Murerwa's vacuous 
budget speech (ref), the GOZ's traditional medium for 
economic strategy, policymaking authority is shifting to 
the new RBZ chief.  While Zimbabwe faces numerous policy 
crossroads, none is more pressing in the economic sphere 
than the exchange rate.  An overvalued official rate (7- 
times stronger than the market rate) coupled with a GOZ 
clampdown on parallel trading are: a) depressing 
Zimbabwe's export sector, b) driving parastatals ever 
deeper into debt (by compelling them to charge 
unrealistically low prices pegged to the official 
exchange for everything from international phone calls to 
electricity) and c) making it increasingly risky for 
firms to import necessary inputs (especially fuel). 
 
3. (SBU) The GOZ can solve its overvalued currency 
problem either by devaluing or officially sanctioning the 
parallel market.  Either course of action offers few 
downsides.  However, the exchange rate has become a line- 
in-the-sand issue for many GOZ hardliners.  The Embassy 
has learned that Murerwa's draft contained an official 
devaluation from Z$824 to 3,800:US$1 (market rate is 
Z$5900:US$1) until November 18, two days before the 
speech.  At that point, hardliners convinced Mugabe to 
strike it.  These advisers continue to believe the GOZ 
can police the parallel market out of existence.  They 
propose the RBZ impose new controls on export processing 
zones, tourism operators, foreign currency accounts and 
remissions. 
 
Comment 
------- 
4. (SBU) Without doubt, Gono is in the hot seat.  If 
nothing is done, the 7-fold disparity between official 
and parallel exchange rates will soon widen, causing 
businesses to further cut operations or stray into 
illegal activity. 
 
Sullivan