Central bank governor Gideon Gono said on 27 January 2005 the fast track land reform programme was over and the government would have “zero tolerance for disruptive activities on land”.
Gono devalued the Zimbabwe dollar but only for gold producers from Z$6 151 to Z$8 692 to the US$. The controlled exchange rate remained at Z$5 900 and the diaspora rate at Z$6 200.
The Zimbabwe dollar was trading at between Z$9 000 and Z$10 000 on the parallel market.
Gono said that he wanted a devaluation to stimulate all exports, but was constrained by political pressures.
Viewing cable 05HARARE176, RBZ: GOLD EXPORTERS GET DEVALUATION; FAST-TRACK
This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L HARARE 000176
STATE FOR AF/S
USDOC FOR ROBERT TELCHIN
TREASURY FOR OREN WYCHE-SHAW
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON
E.O. 12958: DECL: 12/13/2014
SUBJECT: RBZ: GOLD EXPORTERS GET DEVALUATION; FAST-TRACK
LAND REFORM “OVER”
Classified By: Classified by Ambassador Christopher Dell
under Section 1.4 e/g
¶1. (C) The highlight of Reserve Bank (RBZ) Governor Gideon
Gono,s January 26 address to the nation on the country,s
economy was the announcement that he had devalued the
zimdollar from Z$ 6,151 to 8,692:US$ for gold producers.
However, he left in place the controlled exchange rate of Z$
5900:US$ for all other exporters as well as the Z$6,200
“Diaspora” rate for non-exporters. The Central Banker also
said the GOZ would address violations of bilateral investment
agreements that occurred during fast-track land reform.
New Gold Rate
¶2. (C) In his quarterly televised address to the nation on
the state of the economy, Gono announced the new rate for
gold exporters. However, as is standard practice in
Zimbabwe, he couched the “gold support price” in a Z$/gram
ratio, rather than more customary US$/oz terms. As a result,
businessmen, bankers and economists with whom we spoke were
initially unaware of how deep the devaluation for that sector
had been. When Econoff commented on the devaluation to
Gono,s advisor Millicent Mombeshora, she smiled and said,
“we don,t talk about ounces of gold here.” The different
measures are designed to make it difficult for local
commentators compare local and international gold prices,
obscuring the inherent exchange rate.
No New Diaspora Rate
¶3. (C) Other than disclosing this new support price for gold,
Gono,s fifth address was uneventful. It was the first time
Gono spoke to the nation without raising the Disapora rate )
the price that the RBZ buys dollars from non-exporters –
which is currently Z$ 6200:US$. Most parallel market trading
took place in the Z$9,000-10,000:US$ range last week,
according to our industry sources. The Reserve Bank Governor
set ambitious goals of US$ 3.1 billion exports in 2005 and
US$ 4 billion in 2006, up from this year,s US$ 1.7 billion
and reminiscent of mid-1990s levels. In follow-up remarks to
the diplomatic community on Jan. 27, Gono confided that he
wanted a devaluation to stimulate all exports, but was
constrained by political pressures for now.
¶4. (C) In his address, Gono acknowledged that the GOZ
violated bilateral investment agreements in its seizure of
some foreign-owned properties during fast-track land reform.
He insisted the GOZ would “examine individual cases of . . .
violations beginning this year, with a view to redressing
anomalies found.” (N.B., while the GOZ has expropriated
seven Amcit properties without due process or compensation,
the U.S. and Zimbabwe do not have a bilateral investment
agreement.) In remarks to diplomats a day later, Gono said
that “fast track land reform is over” and that the GOZ would
now have “zero tolerance for disruptive activities on land.”
¶5. (C) Gono’s declared policy goals are inherently
contradictory – he cannot simultaneously maintain an
artificially strong zimdollar (as his principal tool for
curbing inflation) and stimulate export growth. He has been
signaling for some time that after elections – now set for
March 31 – the exchange rate will be eased. It is difficult
to judge whether Gono’s announcement of fast track land
reform’s end to the diplomatic community is authoritative.
Land reform is outside his nominal portfolio, but Gono is
increasingly seen as the de facto prime minister. What is
clear is that Gono recognizes that the GOZ needs to refurbish
its credentials on respecting property rights and
international accords, if it is to have any hope of
attracting FDI in the future.