Former United States ambassador to Zimbabwe Christopher Dell said central bank governor Gideon Gono was corrupt to boot.
He said this in a comment to a cable that he dispatched on 17 July 2006 after Gono had told him that inflation, which had become the country’s worst enemy, was affecting everyone except the political elite who were on the United States sanctions list.
Gono said corruption was rampant among the specially designated nationals so turning around the economy would require removing their incentives to engage in corrupt activities.
“Gono is himself an SDN and by all accounts a pretty corrupt one to boot,” Dell said in a comment after the central bank’s remarks.
Full cable:
Viewing cable 06HARARE884, CENTRAL BANK HEAD – RUNNIN’ OUT OF ZEROES
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Reference ID |
Created |
Released |
Classification |
Origin |
VZCZCXRO0119
PP RUEHMR RUEHRN
DE RUEHSB #0884/01 1980705
ZNY SSSSS ZZH
P 170705Z JUL 06
FM AMEMBASSY HARARE
TO RUEHUJA/AMEMBASSY ABUJA PRIORITY 1273
RUEHAR/AMEMBASSY ACCRA PRIORITY 1120
RUEHDS/AMEMBASSY ADDIS ABABA PRIORITY 1277
RUEHBY/AMEMBASSY CANBERRA PRIORITY 0538
RUEHDK/AMEMBASSY DAKAR PRIORITY 0903
RUEHKM/AMEMBASSY KAMPALA PRIORITY 1331
RUEHNR/AMEMBASSY NAIROBI PRIORITY 3703
RUEHFR/AMEMBASSY PARIS PRIORITY 1100
RUEHRO/AMEMBASSY ROME PRIORITY 1740
RUEHC/SECSTATE WASHDC PRIORITY 0368
RHEHNSC/NSC WASHDC PRIORITY
RUEKJCS/JOINT STAFF WASHDC PRIORITY
RUCNDT/USMISSION USUN NEW YORK PRIORITY 1488
RUEHBS/USEU BRUSSELS PRIORITY
RUEKDIA/DIA WASHDC PRIORITY
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK PRIORITY
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY PRIORITY
RUEPGBA/CDR USEUCOM INTEL VAIHINGEN GE PRIORITY
S E C R E T SECTION 01 OF 03 HARARE 000884
SIPDIS
NOFORN
SIPDIS
AF/S FOR HEIDY SERVIN-BAEZ, NSC FOR SENIOR AFRICA DIRECTOR
¶C. COURVILLE, DEPARTMENT PASS TO EU MEMBER STATES COLLECTIVE
E.O. 12958: DECL: 07/14/2016
SUBJECT: CENTRAL BANK HEAD – RUNNIN’ OUT OF ZEROES
Classified By: AMBASSADOR DELL, REASONS 1.4 (b) (d)
——-
Summary
——-
¶1. (S/NF) Reserve Bank Governor Gideon Gono acknowledged to
the Ambassador in a July 13 meeting that the Zimbabwean
economy was in a state of crisis. Despite a modest drop in
the annual rate, which he claimed reflected an abundant
harvest, inflation remained the country,s greatest problem.
It was affecting virtually everyone save for those few at the
top who, ironically, were those targeted by western
sanctions. Gono asked that the U.S. and the international
community meet the GOZ more than halfway in extending
assistance. The Ambassador responded that it was not a
question of percentages but of timing. The GOZ had to accept
the need for reform and begin reforms before the
international community would provide assistance. The IMF
vote, for instance, might have been quite different if the
GOZ had begun implementing IMF policy recommendations rather
than repaying its arrears. Gono conceded that the GOZ had
made mistakes and needed to embrace reforms. End Summary.
——————–
State of the Economy
——————–
¶2. (S/NF) Gono began the meeting by showing the Ambassador
his latest purchase, an oversize calculator the size of a
small laptop computer. However, he ruefully noted that it no
longer had enough zeros to help him calculate in Zimbabwean
dollars. The Ambassador said that from a layman,s point of
view, the economic collapse seemed to be accelerating. For
instance, 6 months ago the largest Zimbabwean dollar note was
20,000; two months ago the 50,000 note was introduced and two
weeks ago the 100,000 note. At this rate we would see ever
larger denominations introduced at ever shorter intervals.
¶3. (S/NF) Gono responded that this was an accurate picture
Zimbabwe,s rapidly worsening economy. Inflation remained
the country,s number one problem. That said, the GOZ had
reported a decline in inflation in the past week, which he
attributed to the increased supply of food resulting from a
better harvest this year. The Ambassador noted that Gono
seemed to be implying that the laws of supply and demand did
in fact work in Zimbabwe, contrary to President Mugabe,s
assertions. Gono conceded the point. (N.B. The Central
Statistical Office released data on July 10 that showed a
drop in the annual inflation rate of 8.9 percent, to 1184.6
percent. However, sensitive reporting indicates that the
GOZ,s internal calculations put the true rate of inflation
is several multiples higher rapidly.)
¶4. (S/NF) Gono said inflation was affecting virtually
everyone and everything in the country. The only exception
was the political elite, who in a direct reference to western
targeted sanctions, Gono referred to as &Specially
Designated Persons8 (SDNs). Gono said corruption among
these people was rampant and that turning the economy around
would require removing their incentives to engage in corrupt
practices. (Comment: Gono is himself an SDN and by all
accounts a pretty corrupt one to boot.) Gono said the cause
of inflation was primarily due to the poor performance of the
agricultural sector, which he attributed to poor use of the
land, especially the high rate of uncultivated land; 40
percent of the total. Despite the better harvest, Zimbabwe
would still need to import food this year, perhaps as much as
600,000 metric tons (MTs) of maize to cover the traditional
lean period from October to February.
HARARE 00000884 002 OF 003
¶5. (S/NF) Gono said he planned to focus his next monetary
policy statement, due before the end of July, on measures
that would help improve agricultural performance and hinted
that he would move to end the system of alternative exchange
rates and subsidies for fuel that have allowed Zimbabwe,s
elites to grow obscenely rich in the current climate. The
Ambassador noted in that in some instances the RBZ’s own
policies either contributed to the problem, or worse were
serving to further squeeze a struggling export sector. In
that regard he cited his recent conversation with an
American-affiliated tobacco firm whose officials had
characterized the rules governing the sector as Byzantine and
stacked against private enterprises. Although this firm
wanted to continue doing business in Zimbabwe, it was
sustaining multi-million dollar losses as the result of
government policies and hyperinflation and would soon be
forced to close its operation. The net result would be a
further loss of exports and hard currency for Zimbabwe. A
flustered Gono ordered his side to take note of this issue.
The Ambassador said the U.S. planned to support a conference
that the American Business Association of Zimbabwe (ABAZ)
would be holding in October that would seek to highlight
changes the GOZ could take to improve the business climate
not just in the agricultural sector but throughout the
economy. Gono applauded the initiative and asked to be
allowed to speak to the conference.
———————–
International Relations
———————–
¶6. (S/NF) Gono said non-economic factors were also
responsible for Zimbabwe,s economic crisis. Among the
latter, the most significant was the poor state of
Zimbabwe,s relation with the international community and
especially western countries and institutions. The IMF vote
in March had been a serious blow that had weakened reformers,
including Gono himself, in the government. Gono acknowledged
that Zimbabwe needed to undertake both economic and political
reforms. However, the international community needed to show
greater tolerance for Zimbabwe. The sanctions were too
punitive and were stifling the ability of the two sides to
reach accord. He hoped the U.S. would lead the way in
relaxing them and in leading the international community to
meet the GOZ more than halfway ) say 60/40.
¶7. (S/NF) The Ambassador responded that it was not a question
of percentages but of who had to take the first step. The
GOZ had to accept that sanctions were not responsible for the
crisis and face to the need for fundamental reforms, both
political and economic. Zimbabwe actually ran a healthy
trade surplus with the U.S. and the EU, proof that the
&sanctions8 were not general in nature and were not
responsible for Zimbabwe,s economic problems. Gono,
wincing, said it was a good point that he had hoped the
Ambassador wouldn,t raise.
¶8. (S/NF) The Ambassador continued that the GOZ had to accept
that the only way forward was to begin reforms and that the
international community would not respond until it did so.
In that regard, he noted that had Zimbabwe chosen to make
only a small payment to the IMF but at the same time had to
accepted and begun to implement the IMF,s policy
recommendations, the result of the Board vote might have been
very different. If the GOZ were to embark on a program of
reform, not to please the international community but because
it would be the right thing for Zimbabwe, it would find the
U.S. a willing and reliable partner.
¶9. (S/NF) The Ambassador added that the GOZ had made a
similar mistake with regard to the &Mkapa initiative.8 In
HARARE 00000884 003 OF 003
effect the GOZ had rejected the UN,s efforts to be a
mediator with the international community out of a fear that
somehow this would &internationalize8 the Zimbabwean
crisis. In doing so, Mugabe hadn,t scored a brilliant
diplomatic coup, as the GOZ would have it, but rather had
thrown away the last, best chance of getting external help in
turning Zimbabwe around. To make the ideological point that
the GOZ considered the crisis a bilateral dispute with the
UK, the government had embraced an initiative that had no
real substance and no real prospects.
¶10. (S/NF) The Ambassador closed by noting that whatever the
issues between London and Harare, our policies toward
Zimbabwe were grounded on our values and principles and the
GOZ shouldn,t fool itself into thinking that it could
improve relations with the U.S. if our concerns about
democracy, human rights, and the rule of law were not
addressed. Gono responded that beginning of wisdom was to
acknowledge one,s mistakes and agreed that Zimbabwe had been
guilty of many tactical errors in its relations with the U.S.
and the international community.
——-
Comment
——-
¶11. (S/NF) Gono remains one of the few open and approachable
senior figures in the GOZ. He is willing to talk and even to
acknowledge the bankruptcy of GOZ policies. But the Governor
is also both architect and implementer of policies that he
knows are at best flawed and more typically ruinous. Gono,s
assertions on the causes of inflation, for instance, glossed
over the role that the RBZ has played by printing huge
amounts of money, although he admitted as much by
acknowledging the need to close the quasi-fiscal deficit.
Beyond a slow and cautious attempt to begin closing down the
cash cows that have created perverse incentives among the
political elite, Gono offered no hint of the policy
prescriptions he might offer in his monetary policy
statement. We suspect he really has few options and that
even this initiative has little prospect of succeeding
against the venal interests of an entrenched leadership. In
fact, we read his focus in the meeting on international
sanctions as further evidence that the GOZ is not prepared to
tackle the real issues. There is in fact little or nothing
Zimbabwe can do to dig itself out of its economic hole. For
instance, there are rumors that Gono may announce a
devaluation. However, a devaluation by itself, with no
concrete reforms and no balance of payments support to back
it, will only speed the currency,s depreciation and further
fuel the concomitant inflation.
Dell
DELL
(48 VIEWS)
