VZCZCXRO5341
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0204/01 0691535
ZNR UUUUU ZZH
P 101535Z MAR 09
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC PRIORITY 4157
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2225
RUEHAR/AMEMBASSY ACCRA 2685
RUEHDS/AMEMBASSY ADDIS ABABA 2806
RUEHBY/AMEMBASSY CANBERRA 2074
RUEHDK/AMEMBASSY DAKAR 2430
RUEHKM/AMEMBASSY KAMPALA 2854
RUEHNR/AMEMBASSY NAIROBI 5282
RUEAIIA/CIA WASHDC
RUEHGV/USMISSION GENEVA 1975
RHEHAAA/NSC WASHDC
RHMFISS/JOINT STAFF WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEFDIA/DIA WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RUZEHAA/CDR USEUCOM INTEL VAIHINGEN GE

UNCLAS SECTION 01 OF 02 HARARE 000204 
 
SENSITIVE 
SIPDIS 
 
AF/S FOR B. WALCH 
AF/EPS FOR ANN BREITER 
NSC FOR SENIOR AFRICA DIRECTOR MICHELLE GAVIN 
STATE PASS TO USAID FOR L.DOBBINS AND J. HARMON 
TREASURY FOR D. PETERS 
COMMERCE FOR ROBERT TELCHIN 
ADDIS ABABA FOR USAU 
ADDIS ABABA FOR ACSS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV PREL ZI
SUBJECT: DONORS BRIEF IMF TEAM ON EVE OF MEETINGS WITH ZIM 
GOVERNMENT 
 
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SUMMARY 
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¶1. (SBU) On March 8, Ambassador McGee and key like-minded 
ambassadors briefed the IMF Article IV mission team on the 
lack of political will to make the inclusive government work 
among top ZANU-PF officials, the dire state of Zimbabwe's 
public finances, and the incompetence and corruption of 
Reserve Bank Governor Gideon Gono.  Post is facilitating 
meetings for the IMF mission with industry leaders to ensure 
it is well informed of business conditions here.  In 
addition, we encouraged the mission to issue a press 
statement with its recommendations at the conclusion of the 
visit.  END SUMMARY. 
 
--------------------------------------------- --- 
Donor Ambassadors Brief IMF Mission Upon Arrival 
--------------------------------------------- --- 
 
¶2. (SBU) On March 8, Ambassador McGee hosted a reception for 
the IMF Article IV mission to brief the IMF's new Zimbabwe 
team on the political and economic situation in the country. 
The IMF mission will conduct meetings with GOZ officials and 
the business and donor communities in Harare from March 9-25. 
 Joined by EU Ambassador Xavier Marchal, German Ambassador 
Albrecht Conze, Canadian Ambassador Barbara Richardson, 
UK/DFID Economic Advisor Stuart Tibbs, DCM, USAID Director 
and Econoff, Ambassador McGee told the mission that top 
ZANU-PF officials lacked the political will to make the 
government of national unity work.  He also impressed upon 
the mission the dire state of Zimbabwe's public finances. 
Concerned that the IMF might tolerate Gideon Gono remaining 
Governor of the Reserve Bank of Zimbabwe (RBZ), the 
ambassadors reiterated the donor community's opinion that 
Gono must go before donor support could flow.  Ambassador 
McGee also shared with the mission the donor community's five 
principles of re-engagement and examples of benchmarks for 
operationalization of the principles. 
 
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Filling the Revenue Gap 
----------------------- 
 
¶3. (SBU) Cognizant of the steep shortfall in revenue and the 
GOZ's ambitious commitment to pay civil servants in foreign 
exchange, mission chief Vitalyi Kramarenko pressed the 
diplomats for suggestions of possible new revenue sources for 
the government, suggesting increased taxation of the wealthy, 
perhaps including higher property taxes.  DFID's Tibbs 
pointed out the tiny size of the formal economy and the 
government,s dependence, for now at least, on VAT returns 
for tax revenue.  Ambassador McGee commented that most of the 
new personal wealth in Zimbabwe was derived from informal or 
illicit activities.  Ambassador Richardson related that 
Canada,s two gold companies in Zimbabwe planned to increase 
production now that the gold price had been freed.  She said 
Qproduction now that the gold price had been freed.  She said 
the current high world gold price could contribute to tax 
revenues, but not immediately. 
 
--------------------------------------------- - 
Enhanced Humanitarian and Technical Assistance 
--------------------------------------------- - 
 
HARARE 00000204  002 OF 002 
 
 
 
¶4. (SBU) Regarding the acute need for budget support, in 
particular to pay school teachers, Tibbs expressed the UK 
government's concern that enhanced humanitarian assistance of 
this type lacked an "exit strategy."  He said his government 
also feared that ZANU-PF could perceive the assistance as 
donor willingness to provide immediate support regardless of 
progres on the principles of re-engagement.  On the dire 
need for technical assistance (TA) to the ministries, 
especially the Ministry of Finance, Kramarenko said the IMF 
was prohibited from providing TA to Zimbabwe at the moment, 
but staff could consider seeking a one-time exception from 
the IMF Board.  In any case, it would cover no more than 1-2 
experts. 
 
¶5. (SBU) Ambassador McGee welcomed news that Sharmini Coorey, 
former mission chief to Zimbabwe, would join the mission for 
its final three days in Harare.  The mission will meet again 
with the like-minded donor group on March 16 and give a "Week 
One" status report.  In addition, it has sought and received 
Post's assistance in arranging meetings with industry leaders 
in banking, agriculture, and accountancy.  Post has also 
arranged an overview on business conditions by the American 
Business Association of Zimbabwe (ABAZ) as well as meetings 
for the mission with key exporters: gold, platinum, and 
diamond producers; tobacco producers; and cotton producers. 
Ambassador McGee encouraged Kramarenko to convey the 
mission's recommendation to government in a press statement 
at the conclusion of its mission.  If the mission decided to 
issue a statement, Kramarenko said it would possibly 
recommend an audit of the RBZ and the return of all budgetary 
responsibility to the Ministry of Finance; he said the 
mission could not recommend Gono's removal. Finally, the team 
agreed to participate in a March 20 DVC with members of the 
Washington donor's conference. 
 
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COMMENT 
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¶6. (SBU) The IMF mission members are for the most part new to 
Zimbabwe.  On the eve of their meetings with government, in 
particular with the RBZ, we sought to alert them to the 
problem of political will and to the incompetence and 
corruption of Gideon Gono's stewardship of the RBZ.  While we 
were struck by some of the mission chief's unrealistic 
initial thoughts on tax revenue sources, the ensuing thirteen 
days of meetings with government officials and the business 
and donor communities should provide the team with ample 
information to identify where the rot lies and advise the GOZ 
on the best way forward.  We will continue to encourage the 
mission to issue a press statement with recommendations at 
the end of their visit, in particular to clarify the notion, 
reported on the front page of today's The Herald, of "IMF 
Qreported on the front page of today's The Herald, of "IMF 
ready to assist Zim."  END COMMENT. 
 
MCGEE