VZCZCXYZ0002
RR RUEHWEB

DE RUEHSB #0135/01 0491534
ZNR UUUUU ZZH
R 181534Z FEB 09
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 4067
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

UNCLAS HARARE 000135 
 
 
DEPT FOR AF/S BWALCH 
AFR/SA FOR LOKEN, DOBBINS, HARMON 
AA/AFR FOR MOORE 
 
AIDAC 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID EFIN EAGR PREL PGOV ASEC ZI
SUBJECT:  ZIM DONOR MEETING WITH PRIME MINISTER 
 
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SUMMARY 
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¶1.  (SBU) Prime Minister Morgan Tsvangirai and Minister of Finance 
Tendai Biti met with Multi Donor Trust Fund (MDTF) representatives 
on February 16 to discuss the dire economic situation and to discuss 
necessary steps to resuscitate the economy.  Tsvangirai focused on 
the need to pay civil servants in forex while Biti discussed 
short-term and emergency plans.  Donors responded by stating that 
non-humanitarian assistance would be dependent on compliance with 
the principles of reengagement.  Immediate confidence-building 
measures should include the release of political detainees, 
replacement of Gideon Gono as Reserve Bank of Zimbabwe (RBZ) 
governor, freeing up the media, and engagement with the 
International Financial Institutions (IFIs).  END SUMMARY. 
 
¶2.  (U) Tsvangirai called the meeting on his first full week in 
office.  Present were representatives, including heads of mission, 
from donors, the World Bank, UNDP, and the African Development Bank. 
 
 
-------------- 
Early Measures 
-------------- 
 
¶3.  (SBU) Tsvangirai commented briefly on the dire economic 
situaton and presented his priorities:  democracy, stabilization, 
and humanitarian needs (which include education, health, food, and 
both urban and rural poverty).  He said that in order for the 
government to operate and demonstrate leadership it needed to get 
civil servants back to work and pay them in forex. 
 
¶4.  (SBU) Biti announced that the government would be presenting its 
stabilization plan, Short Term Emergency Plan (STEP), to the cabinet 
on February 24.  Among the immediate measures were the formation of 
a National Economic Council (NEC) (inclusive of NGOs, labor, and the 
private sector; and led by the Ministry of Economic Planning and 
Investment Promotion).  The NEC will be mandated to develop a more 
comprehensive medium-term recovery plan with strong stakeholder 
involvement and public dialogue. 
 
-------------------------------- 
Short Term Emergency Plan (STEP) 
-------------------------------- 
 
¶5.  (SBU) Biti noted that STEP is not transformative.  It is, he 
said, mouth-to-mouth resuscitation intended to begin the recovery 
process.  It will need to be followed by a more comprehensive 
medium-term economic recovery plan that is vetted with stakeholders 
and donors. 
 
¶6.  (SBU) Key elements of the STEP as presented by Biti are[e1]: 
 
¶A.  Address humanitarian crisis (including a special focus on 
orphaned and vulnerable children (OVC) and the urban poor): 
    ¶1. In Education: 
     a. bring teachers back to work and complete examination 
markings. 
    ¶2. In Health: 
     a. improve water and sanitation in cholera affected areas; 
     b. provide drugs to treat TB; 
     c. provide blankets, beds and other emergency supplies; 
     d. increase availability of ARVs for people living with 
HIV/AIDS. 
 
¶B.  Reform RBZ to focus on monetary role and cease all non-monetary 
activities. (COMMENT:  RBZ reform is generally understood to include 
finding a way to replace the current governor.  END COMMENT.) 
 
¶C.  Agriculture 
    ¶1. Ensure the preparation of the winter crop, namely wheat 
(100,000 tons needed) and tobacco; 
    ¶2. Ensure security of tenure (land commission to ensure that any 
person who wishes to farm shall have the opportunity to get secure 
tenure); 
    ¶3. Develop mechanisms for farmers to access commercial bank 
loans. 
 
¶D.  Industry 
    ¶1. Facilitate recapitalization; 
    ¶2. Focus on strategic industries (for example fertilizer 
production). 
Qproduction). 
 
¶E.  Mining 
    ¶1. Introduce mechanisms for taxation and royalty that facilitate 
operational efficiency and provide income to the State. 
 
¶F.  Energy 
    ¶1. Resuscitation of Beira (Mozambique) Pipeline operations; 
    ¶2. Assess electricity generation and related rail road needs. 
 
¶G.  Water 
    ¶1. Strengthen local authorities and transfer reticulation and 
local management to them. 
 
¶H.  Tourism for quick revenue generation. 
 
¶I.  Economic policy (demand side) 
    ¶1. Stop printing of money; 
    ¶2. Decision on what currency will be used to maintain Government 
accounts; 
    ¶3. Institute interest regime to promote savings; 
    ¶4. Introduction of non-cash payment systems (Electronic Funds 
Transfer at Point of Sale). 
 
¶J.  Review Tax Regime and Revenue System with regard to: 
    ¶1. Stock exchange; 
    ¶2. VAT; 
    ¶3. Toll Duties; 
    ¶4. Licensing. 
 
---------------------- 
Emergency Requirements 
---------------------- 
 
¶7.  (SBU) Biti explained that the GOZ expects to have, within six 
months of initiating STEP, a revenue base from which to draw on.  At 
present, however, the current tax receipts are only estimated at 
US$10 million a month.  Therefore, for the next six months the 
Government will need bridge funding for recurrent expenditures, 
estimated at US$120 million a month, for a total of US$720 million. 
This breaks down as follows (amounts stated in USD): 
 
-Basic salary allowances for Civil Servants:  $50 million 
-Dollarized pensions:  $20 million 
-Short-term assistance to local authorities:  $10 million 
-Drugs and other health service costs:  $15 million 
-Essential supplies for State agencies:  $15 million 
-Sanitation and water services in urban areas:  $10 million 
 
¶8.  (SBU) The Government will be discussing this financing gap with 
the Republic of South Africa as the first point of entry.  GOZ will 
later organize donor and investor conferences. 
 
¶9.  (SBU) Complementary measures will include the passing of 
legislation in relation to: 
 
- Freedom of the press and opening up of air waves 
(to be administered by a national press coordinating and oversight 
body); 
- Preparation for the new constitution based on a public discourse; 
- Adherence to basic laws (freedom of expression, movement, 
settlement etc); 
- Governance and gender inclusiveness. 
 
¶10.  (SBU) The Minister of Finance also noted that a revised budget 
will be prepared that will separate humanitarian and recurrent 
budget requirements and revise recent budget figures announced by 
the Ministry of Finance in January.  He also clarified that the 
salary requirements included in the emergency plan include all civil 
service, military and police. 
 
----------------------------------------- 
Donors Response - Remember the Principals 
----------------------------------------- 
 
¶11.  (SBU) The donors' response was provided by the Norwegian 
ambassador as chair of the Heads of Mission and the DFID director as 
chair of the Aid Agency Heads.  While welcoming change in Zimbabwe, 
they reminded Tsvangirai and Biti of the principles of reengagement. 
 They noted that many of the government's requirements are now being 
fulfilled through humanitarian assistance.  Acknowledging the new 
government's budgetary needs, and constraints on donors to provide 
direct support for the budget, they asked about possible regional 
support for the budget.  They also suggested that it was important 
for the Ministry of Finance to assess its own resources to meet 
current and future needs.  To prepare for more direct support, 
donors needed to see confidence building events - freeing political 
Qdetainees, reorganization of the RBZ, freeing up the media, and 
reengagement with the IFIs.  Possibly donors and the GOZ needed to 
look at two phases:  one of enhanced emergency assistance and 
another longer-term period of larger and longer-term support.  The 
donors' representatives cautioned that it was important to take 
careful stock of needs, and to get it right. 
 
 
¶12.  (SBU) Tsvangirai responded that he understood the need to build 
confidence and that there are rules to budget support.  What he 
hoped to do in this meeting, he said, was define the menu and then 
look for the appropriate ingredients.  If some of those are not 
available, the government would have to adjust or look elsewhere. 
He commented that reengagement with the IFIs at this time would be 
premature. 
 
------------- 
Sink or Swim 
------------- 
 
¶13.  (SBU) The new government is clearly struggling to get its feet 
on the ground and locate its offices.  Meanwhile they are trying to 
take up the issues that have been handed to them when they joined 
the government and accepted critical ministries, such as finance, 
under less than ideal conditions, e.g. the continuing tenure of 
Gono.  There is no backup to the ministers themselves t this point 
with little trust for the staffs that they have inherited and they 
have little experience running a ministry. 
 
------- 
COMMENT 
------- 
 
 
¶14.  (SBU) While satisfactory compliance with the principles of 
reengagement will take time, donors are frustrated by the failure of 
the government - primarily the fault of ZANU-PF - to take some 
fundamental confidence-building measures to demonstrate the 
commitment of the government to reform.  These measures include the 
release of political detainees, some of whom have been in custody 
since the end of October, and the release of recently detained 
Deputy Minister of Agriculture Designate Roy Bennett. 
 
¶15.  (SBU) The donor community is mindful of not stepping over the 
line between providing essential humanitarian assistance and bailing 
out the Mugabe regime.  Nevertheless, if transitional assistance is 
not provided to the new leadership, in the form of technical 
assistance and advisory services, the new government is sure to 
flounder.  In particular, advisory services to the Ministry of 
Finance are urgently needed to encourage and prepare it for 
reengagement with the IMF as a critical first step.  Assistance is 
also required to help in unraveling the wage bill and determining 
available resources and requirements in order to rationalize 
short-term budgets and requests.  END COMMENT. 
 
MCGEE 
[e1]You can't use the automatic bullets or even tabs, etc in a 
telegram - you have to space over manually and put in your own 
identifiers.