Dell said Gono was corrupt to boot

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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PP RUEHMR RUEHRN

DE RUEHSB #0884/01 1980705

ZNY SSSSS ZZH

P 170705Z JUL 06

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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

TAGS: PREL ZI

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)