VZCZCXRO1961
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0266/01 0861023
ZNR UUUUU ZZH
P 271023Z MAR 09
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC PRIORITY 4296
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2256
RUEHAR/AMEMBASSY ACCRA 2735
RUEHDS/AMEMBASSY ADDIS ABABA 2857
RUEHBY/AMEMBASSY CANBERRA 2122
RUEHDK/AMEMBASSY DAKAR 2478
RUEHKM/AMEMBASSY KAMPALA 2905
RUEHNR/AMEMBASSY NAIROBI 5346
RUEAIIA/CIA WASHDC
RUEHGV/USMISSION GENEVA 2024
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 000266 
 
SENSITIVE 
SIPDIS 
 
AF/S OR B. WALCH 
AF/EPS FOR ANN BREITER 
DRL FOR N. WILETT 
NSC FOR SENIOR AFRICA DIRECTOR 
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: PHUM PREL ECON ASEC EAID ZI
SUBJECT: BANKS STRUGGLE WITH LOGISTICS OF PAYMENTS TO CIVIL 
SERVANTS 
 
REF: HARARE 232 
 
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Summary 
------- 
 
¶1. (U) Funds have been released to pay government employees 
the March US$100 foreign exchange allowance that tops up 
their worthless Zimbabwe dollar salaries.  At mid-month, 
however, when the allowances were due to be paid, many 
recipients were not able to withdraw the funds due to 
shortcomings in the banking sector's payment system and the 
logistical challenges of importing and distributing cash to 
all bank branches.  Government employees in rural areas were 
still struggling to access the allowance at month's end. 
With the official Poverty Datum Line for a family of five set 
at a generous US$552 per month, even assuming cash 
distribution problems are solved, the meager allowance will 
not satisfy civil servants and the uniformed forces, leading 
to frustration and impatience within these important 
populations.  End Summary. 
 
---------------------------------- 
Payment System to Blame for Delays 
---------------------------------- 
 
¶2. (SBU) Martha Mugwenhi, Deputy Director of Domestic and 
International Finance in the Ministry of Finance, told 
economic specialist on March 25, 2009 that the GOZ had again 
paid out a US$100 monthly allowance in March to all civil 
servants and uniformed forces as a top-up to their 
(worthless) Zimbabwe dollar salaries.  Deficiencies in the 
banking sector's payments system had prevented many civil 
servants from accessing their allowance quickly, as local 
banks have to clear foreign currency payments at their 
offshore Nostro accounts rather than domestically (reftel). 
Ron Mutandagayi, Chief Operating Officer of ZB Bank, told us 
on March 24, 2009 that banks had not been able to import cash 
fast enough and distribute it to their branches to pay civil 
servants on time. 
 
--------------------------------------------- ---- 
Importing and Distributing Cash Further Challenge 
--------------------------------------------- ---- 
 
¶3.  (SBU) Dr. John Mangudya, president of the Bankers 
Association of Zimbabwe and managing director of CBZ pointed 
out to us on March 26 that the majority of government 
employees banked at non-commercial banks such as POSB (a 
savings bank), CABS (a building society) and Agribank (a 
government-owned bank for the agricultural sector), which had 
the widest network of branches in Zimbabwe.  The non-bank 
financial institutions, in particular, were still struggling 
with the combined problems of offshore payments and the 
importation and distribution of cash, especially to rural 
areas.  Long lines had reappeared outside these institutions. 
 Agribank has the additional problem of being unable to open 
Nostro accounts due to being a sanctioned entity; it has to 
QNostro accounts due to being a sanctioned entity; it has to 
rely on third parties to import US dollars on its behalf. 
School headmasters in rural villages told us today that their 
teachers were still struggling to access the allowance paid 
into their bank accounts, leaving classrooms empty as 
 
HARARE 00000266  002 OF 002 
 
 
teachers spend their days waiting outside banks.  Commercial 
banks, on the other hand, had been able to use their foreign 
exchange cash flow to pay out allowances upon deposit. 
 
------------------------------------- 
Government Employees Mired in Poverty 
------------------------------------- 
 
¶4. (U) The government's Central Statistical Office announced 
this week that the Poverty Datum Line for a family of five 
was US$552 in January, 2009.  (NOTE: In contrast, GDP per 
capita is only about a dollar a day, about 27% of the 
calculated poverty datum line.  END NOTE.)  Although prices 
have been falling since January, the US dollar allowance 
still leaves the vast majority of civil servants and 
uniformed forces mired in poverty. 
 
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Comment 
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¶5. (U) Following government promises to pay salaries in 
foreign currency, even assuming cash distribution problems 
are solved, the meager allowance will be insufficient to 
satisfy civil servants and the uniformed forces, leading to 
frustration and impatience within these important populations. 
DHANANI