Gideon Gono reinvents Gideon Gono

Central bank governor Gideon Gono told United States ambassador Christopher Dell, two days before the presentation of his first 2007 monetary policy statement, that he was going to begin “true reform”, promote national unity and engage the international community “East, West, North and South”.

He said Zimbabwe had to “bite the bullet” and embrace market reforms. He would call for market determined prices, convergence of foreign exchange rates and interest rates, privatisation of parastatals, the honouring of Bilateral Investment Protection and Promotion Agreements and an end to farm disruptions.

He, however, ruled out devaluation saying that none of the eight devaluations he had announced in his three-year tenure as governor had stabilised the economy.

Gono said his enemies were sharpening their knives for him, and that infighting now extended as far as the state security forces.

With suspicion rife, these were “scary times” for him personally. He feared for his personal safety and had begun to use decoy automobiles and moved to different houses at night.

Full cable:

Viewing cable 07HARARE76, GIDEON GONO REINVENTS GIDEON GONO

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C O N F I D E N T I A L SECTION 01 OF 03 HARARE 000076

SIPDIS

SENSITIVE

SIPDIS

AF/S FOR S. HILL

NSC FOR SENIOR AFRICA DIRECTOR B. PITTMAN

STATE PASS TO USAID FOR M. COPSON AND E.LOKEN

TREASURY FOR J. RALYEA AND T.RAND

COMMERCE FOR BECKY ERKUL

ADDIS ABABA FOR USAU

ADDIS ABABA FOR ACSS

E.O. 12958: DECL: 01/12/2016

TAGS: EFIN PGOV ZI

SUBJECT: GIDEON GONO REINVENTS GIDEON GONO

REF: HARARE 01361

Classified By: Ambassador Christopher Dell under Section 1.4 b/d

——-

Summary

——-

¶1. (C) In a January 29 meeting with the Ambassador, Reserve

Bank of Zimbabwe (RBZ) Governor Gideon Gono said that January

31’s Monetary Policy Statement (MPS) would be “totally

different” from previous statements. Gono said he would

confront the governance problems that were the root cause of

the country’s economic decline and call on Zimbabwe to “bite

the bullet” and embrace market reforms. The Ambassador

responded that the U.S. and the international community would

welcome a genuine reform package. Gono added that it was not

necessary to devalue the currency, as has been widely

assumed, as it would accomplish little by itself. Gono added

that he felt increasingly under threat and expected the

pressure to increase following the MPS. End Summary

———————–

Governance Is The Issue

———————–

¶2. (C) Governor Gono told the Ambassador at a January 29

meeting at the Reserve Bank that he would deliver his long

awaited ) and several times delayed — Monetary Policy

Statement (MPS) on January 31. Gono said this MPS would be

“totally different.” He would go beyond monetary policy and

address the governance issues that were at the root of

Zimbabwe’s economic problems. It was time to acknowledge

past mistakes, begin “true reform,” promote national unity

and engage the international community “East, West, North and

South,” as well as the IMF.

¶3. (C) Gono said the key to success would be stakeholder

buy-in to the implementation of a “holistic package” of

complementary reforms. In that regard, Gono claimed to have

consulted widely in the government and the business

community, showing the Ambassador a series of written

summaries of the consultations. Gono claimed he had not

briefed the Cabinet on his approach to the MPS to prevent

them from taking a defensive position in the market.

However, in response to a direct question from the Ambassador

as to whether he had briefed the MPS to President Mugabe, who

had been out of the country, Gono avoided a direct response.

————————-

A Call for Market Reforms

————————-

¶4. (C) Gono said Zimbabwe had to “bite the bullet” and

embrace market reforms. He said he would call for market

determined prices, convergence of foreign exchange rates and

interest rates, privatization of parastatals, the honoring of

Bilateral Investment Protection and Promotion Agreements, and

an end to farm disruptions. With respect to the latter, Gono

said Zimbabwe couldn’t continue chasing away Zimbabweans who

HARARE 00000076 002 OF 003

could contribute to the turnaround. The RBZ head said he

intended to zero in on governance issues and hold ministers

accountable for their portfolios. Zimbabwe was making a

mockery of its assets, and the damage was being perpetrated

by ZANU-PF brass. If market policies and reforms were not

adopted, Gono claimed he was prepared to resign.

¶5. (C) Echoing remarks he made to the Ambassador in

November (reftel), Gono admitted that the GOZ had overplayed

sanctions as the root of all of Zimbabwe’s woes. He added

that no economic turnaround in history had succeeded without

a “thumbs up” from the U.S. In that regard, the Ambassador

noted for the record that contrary to recent reports in the

Zimbabwean press, the USG did not tell American companies

where to invest, but if Zimbabwe implemented the right

reforms, the U.S. would be at its side. Gono conceded the

point and said that government control of the media was a

“soft” issue on which the GOZ should be prepared to give

ground.

¶6. (C) The Ambassador said many donors were willing to

support a genuine reform program but that Zimbabwe would have

to take the first steps and that reforms would have to be

political as well as economic. Gono replied that he had

approached Mugabe about the “tension in the country” and said

Mugabe was “aware” of the futility of trying to turn around

the economy in the present political climate.

—————————-

Devaluation Is Not the Issue

—————————-

¶7. (C) Asked by the Ambassador whether a significant

devaluation was in the cards (N.B. the currency has swooned

recently to Z$5,000:US$ on the street, against an official

rate of Z$250:US$ – unchanged since July 31, 2006 despite

quadruple-digit inflation), Gono replied that it was not

necessary, and devaluation was “not the issue.” He pointed

out that none of the eight devaluations he had announced in

his three-year tenure as Governor had stabilized the economy,

and no devaluation could cure Zimbabwe’s economic crisis

until the GOZ got pricing right. In that regard, he recited

a litany of price distortions that, he said, continued to

compel him to print money, including among others the

electric power company’s tariff structure, which was so

skewed that a household paid less for a month’s power than

for candles or firewood to cover one evening’s power outage.

—————————————–

Heaping Scorn on Finance Minister Murerwa

—————————————–

¶8. (C) Gono heaped scorn on Finance Minister Murerwa for

failing to define a “holistic package” of reforms and for

failing to address price distortions in his 2007 budget. He

mocked him for having expected a complementary monetary

policy statement from Gono within a week of the budget

release in November. Waving Murerwa’s March 2006 letter to

the IMF in the air, and pointing to the promises he had made,

Gono said Zimbabwe’s credibility was running out fast.

HARARE 00000076 003 OF 003

Unless there was buy-in to his MPS and real progress to point

to, he would not attend the February IMF Board meeting on

Zimbabwe.

———————————

“Scary Times” For Gono Personally

———————————

¶9. (C) Gono said his enemies were sharpening their knives

for him, and that infighting now extended as far as the state

security forces. With suspicion rife, these were “scary

times” for Gono personally. He feared for his personal

safety, and had begun to use decoy automobiles and move to

different houses at night.

———————————-

Ring Fencing Quasi-Fiscal Spending

———————————-

¶10. (C) In a hasty aside, as he walked the Ambassador to

the elevator, Gono let slip, without further explanation,

that he had “ring fenced” the RBZ’s quasi-fiscal activity

into a separate company “so the spending would not interfere

with the monetary anchor.”

——-

Comment

——-

¶11. (C) Gono was as usual short on specifics and long on

words. However, this was a different Gono, more agitated and

more accommodating than any time in the previous year. In

fact, there was an echo of the Gideon of two years ago, the

Gono in whom the business and international community had

seen a potential market reformer. He is right, of course,

that governance, or rather mis-governance, is at the heart of

Zimbabwe,s economic collapse and he is right that

fundamental reforms are needed.

¶12. (C) That said, we are skeptical that Gono is sincere in

his call for bold reforms. In fact, his comment at the end,

about fencing off quasi-fiscal activities, would seem to

indicate that he has no intention of pursuing genuine reform.

Instead, we suspect that this may be a clever ploy to blame

the country’s economic ills on ZANU-PF insiders, many with a

grudge against Gono, rehabilitate his reputation as a

reformer and, perhaps most importantly, at the same time

avoid a “useless” devaluation that might harm those like

himself and President Mugabe who are profiting massively from

Zimbabwe’s multiple exchange rates.

DELL

(33 VIEWS)