Gono goes to the streets for money

Central bank governor Gideon Gono was in March 2007 forced to go the streets for money after South African banks refused to give him credit to finance food imports, his advisor Munyaradzi Kereke told United States embassy officials.

Kereke said Zimbabwe had a shortfall of US$1.1 billion and had produced only 650 000 tonnes of maize, less than half the national requirement.

He said Gono was forced to print money and go to the streets to buy foreign currency pushing the parallel market rate from Z$8 000 to Z$20 0000 in just three weeks.

Full cable:

Viewing cable 07HARARE239, ZIMBABWE’S CENTRAL BANK DESPERATELY TRYING TO

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VZCZCXRO2526

PP RUEHMR RUEHRN

DE RUEHSB #0239/01 0811423

ZNY CCCCC ZZH

P 221423Z MAR 07

FM AMEMBASSY HARARE

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RUEHBS/USEU BRUSSELS

RUEHGV/USMISSION GENEVA 0663

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RUCNDT/USMISSION USUN NEW YORK 1755

RUEKJCS/JOINT STAFF WASHDC

RUEHC/DEPT OF LABOR WASHDC

RUEATRS/DEPT OF TREASURY WASHDC

RHEFDIA/DIA WASHDC//DHO-7//

RUCPDOC/DEPT OF COMMERCE WASHDC

RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK//DOOC/ECMO/CC/DAO/DOB/DOI//

RUEPGBA/CDR USEUCOM INTEL VAIHINGEN GE//ECJ23-CH/ECJ5M//

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000239

SIPDIS

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: EAGR EFIN PHUM PGOV ZI

SUBJECT: ZIMBABWE’S CENTRAL BANK DESPERATELY TRYING TO

FINANCE GRAIN IMPORTS

REF: A. HARARE 200

¶B. HARARE 195

¶C. HARARE 172

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

——-

Summary

——-

¶1. (C) According to a senior official at the Reserve Bank of

Zimbabwe (RBZ), Zimbabwe will likely produce less than half

the country’s maize requirements. South African banks were

reluctant to lend to the GOZ the forex needed to finance

imports so the RBZ has turned to the street, fuelling rapid

depreciation of the currency. The RBZ official asked for

U.S. assistance while acknowledging that the GOZ had shot

itself in the foot by beating opposition politicians. End

Summary.

———————————

GOZ in Desperate Search for Grain

———————————

¶2. (C) Munyaradzi Kereke, Senior Advisor to RBZ Governor

Gideon Gono, told econoff on March 16 that Zimbabwe would

likely produce only 650,000-700,000 MT maize this year, less

than half the country’s requirement (Ref A). Kereke said

Governor Gono had gone to South Africa, desperately trying to

negotiate bank loans to finance maize imports. However, the

banks were skeptical of Zimbabwe’s capacity to service any

debt and reluctant to lend.

¶3. (C) Kereke implored the USG to assist Zimbabwe with grain

but confessed that the GOZ had “shot itself in the foot –

with a bazooka” in its recent reaction to opposition protests

(Ref B). He hoped the international community would assist

Zimbabwe regardless and noted that the Zimbabwean people were

angry and hungry, and more likely than ever to take their

demands to the street.

———

And Forex

———

¶4. (C) Kereke admitted that Gono’s failure in South Africa

had put the government under intense pressure to acquire the

foreign exchange needed to pay for the imports. He

fleetingly showed a paper dated March 14, prepared by the RBZ

for Mugabe, on “Foreign Exchange Requirements and Alternate

Sources of Revenue.” It put Zimbabwe’s current forex

shortfall at US$1.1 billion.

¶5. (C) In response, the RBZ has launched a major effort to

acquire needed forex from the parallel market by printing

Zimbabwe dollars. The RBZ’s efforts are a primary reason the

street price of the Zimbabwe dollar has gone from Z$8,000:USD

to Z$20,000:USD in just three weeks (the official exchange

rate remains fixed at Z$250:USD.) The RBZ has also

reportedly zeroed in on the mining sector as a source of

HARARE 00000239 002 OF 002

foreign exchange. Zimplats CEO Greg Sebborn told us his

company has come under pressure from Kereke to sell its

offshore-held foreign exchange (Ref C) to the Bank to finance

a “special grain import program.”

——-

Comment

——-

¶6. (C) The GOZ is in a state of absolute denial if it thinks

the international community is going to bail it out of its

economic bind with food assistance while it is busy

threatening western diplomats and physically abusing

opposition politicians. As we said in Ref A, we need to

provide food aid directly to those areas hardest hit rather

than through the government’s distribution system.

SCHULTZ

(29 VIEWS)