IMF team paints a bleak picture of Zimbabwe


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A visiting International Monetary Fund team painted a bleak picture of Zimbabwe which they said could end the year with inflation of 80 percent and a budget deficit of 23 percent against the target 3.8 percent with the economic itself shrinking by 5.5 percent in real terms.

The team said for the IMF to help Zimbabwe it had to restore the rule of law; draft and present a credible 2001 budget that demonstrated fiscal responsibility with strong measures; reveal what the land reform programme would actually comprise; and address the intertwined hard currency shortage and still overvalued, non-market determined foreign exchange rate.

The team leader Pablo Neuhaus said on the plus side, the new economic ministers – Simba Makoni of Finance and Nkosana Moyo of Industry- admitted the government’s economic failure to date and recognised the need for swift and strong measures.

They had also admitted for the first time that the war in the Democratic Republic of Congo had cost the country Z$$10 billion or US $200 million since August 1998.

“At least they are no longer in denial,” said Neuhaus, “as their predecessors were.”

 

Full cable:

 

Viewing cable 00HARARE5072, IMF REVIEW TEAM PROVIDES A BLEAK OUTBRIEF

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Reference ID

Created

Released

Classification

Origin

00HARARE5072

2000-09-12 14:34

2011-08-30 01:44

CONFIDENTIAL

Embassy Harare

This record is a partial extract of the original cable. The full text of the original cable is not available.

 

121434Z Sep 00

 

 

CONFIDENTIAL     PTQ9035

 

PAGE 01       HARARE 05072 01 OF 02 121436Z

ACTION AF-00

 

INFO LOG-00   NP-00   AID-00   AMAD-00 CEA-01   CIAE-00 CTME-00

DODE-00 SRPP-00 DS-00   EB-00   EXIM-01 E-00     VC-00

FRB-00   H-01     TEDE-00 INR-00  IO-00   ITC-01   LAB-01

L-00     VCE-00   AC-01   NSAE-00 OIC-02   OMB-01   OPIC-01

PA-00   PM-00   PRS-00   ACE-00   P-00     SP-00   SSO-00

STR-00   USIE-00 FMP-00   R-00     PMB-00   DSCC-00 DRL-02

G-00     NFAT-00 SAS-00     /012W

——————84490A 121436Z /38

FM AMEMBASSY HARARE

TO SECSTATE WASHDC PRIORITY 7065

INFO SOUTHERN AFRICAN DEVELOPMENT COMMUNITY

NSC WASHDC

USDOC WASHDC

DEPT OF TREASURY WASHDC

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 005072

 

SIPDIS

 

STATE FOR AF/S, AF/EPS, EB/IFD/ODF, EB/TPP/ODC

TREASURY FOR ED BARBER, GRACE SONE AND HOFFMAN BARAK

USDOC FOR 4510 ERIC HENDERSON

STATE PASS USTR/RWHITTAKER

NSC FOR SENIOR AFRICA DIRECTOR GAYLE SMITH

 

E.O. 12958: DECL: 08/31/07

TAGS: EFIN PGOV ZI

SUBJECT: IMF REVIEW TEAM PROVIDES A BLEAK OUTBRIEF

CONFIDENTIAL

 

 

PAGE 02       HARARE 05072 01 OF 02 121436Z

WITH NO NEW SURPRISES

 

CLASSIFIED BY ECON/COMM OFFICER MARK PROKOP, REASON

1.5 (B), (D)

 

REFS: A) HARARE 4883, B) HARARE 4084, C)HARARE 2684,

D) 1999 HARARE 6612

 

1. (C) SUMMARY: ON SEPTEMBER 12 THE IMF RESREP,

ROBERT FRANCO, AND THE IMF TEAM LEADER, PAULO

NEUHAUS, PROVIDED THE DONOR COMMUNITY WITH AN HOUR-

LONG OUTBRIEF ON THE COMPLETED 2 1/2 WEEK-LONG

ARTICLE IV REVIEW OF ZIMBABWE. NEUHAUS PROVIDED NO

NEW SURPRISES OR BOMBSHELLS, BUT DID REVEAL, AS

ANTICIPATED, THAT “THE CURRENT ECONOMIC SITUATION IS

VERY BAD AND WORRISOME, AND THE OUTLOOK IS AT BEST,

MIXED.” LOOKING AHEAD, THE TEAM WILL NOW FINALIZE

AND CIRCULATE THEIR REPORT IN WASHINGTON, THE GOZ

ECONOMIC LEADERSHIP WILL MEET WITH TOP FUND

MANAGEMENT IN PRAGUE, AND IN LATE NOVEMBER/EARLY

DECEMBER A FORMAL ACTION RECOMMENDATION WILL BE PUT

FORTH TO THE BOARD. FOR POSITIVE ACTION TO BE

RECOMMENDED, BETWEEN NOW AND THEN ZIMBABWE MUST:

RESTORE THE RULE OF LAW; DRAFT AND PRESENT A CREDIBLE

2001 BUDGET THAT DEMONSTRATES FISCAL RESPONSIBILITY

WITH STRONG MEASURES; REVEAL WHAT THE LAND REFORM

PROGRAM WILL ACTUALLY COMPRISE; AND ADDRESS THE

INTERTWINED HARD CURRENCY SHORTAGE AND STILL

OVERVALUED, NON-MARKET DETERMINED FOREIGN EXCHANGE

RATE.

 

CONFIDENTIAL

 

PAGE 03       HARARE 05072 01 OF 02 121436Z

2. (C) OTHER ECONOMIC DATA SHARED ARE THAT THE FUND

PROJECTS YEAR-END INFLATION OF 80 PERCENT, THE 2000

GOVERNMENT BUDGET DEFICIT WILL SWELL TO AT LEAST 23

PERCENT OF GDP (VERSUS 3.8 PERCENT BUDGETED FOR), AND

IN REAL TERMS THE IMF THINKS THE ECONOMY WILL SHRINK

5 1/2 PERCENT THIS YEAR AND AT LEAST 6 1/2 PERCENT

NEXT YEAR, BARRING “THE VERY REAL THREAT OF A

MELTDOWN.” AT THE REQUEST OF THE AGRICULTURE

MINISTER THE WORLD BANK IS CONDUCTING AN EMERGENCY,

TWO TO THREE WEEK-LONG TECHNICAL REVIEW AND

ASSESSMENT OF THE CURRENT, ILL-DEFINED, LAND REFORM

PROGRAM. THIS REVIEW IS DESIGNED TO LAY OUT THE

REALITIES, CONSEQUENCES AND COSTS OF THE CURRENT GOZ

FAST-TRACK PROGRAM. END SUMMARY.

 

—————-

AT THE PRECIPICE

—————-

 

3. (C) THE IMF TEAM LEADER, PABLO NEUHAUS, PRESENTED

A CONCISE AND FAST-MOVING SUMMARY OF THE CURRENT

ECONOMIC SITUATION AND OUTLOOK. THE HIGHLIGHTS ARE:

YEAR-END INFLATION PREDICTED AT ABOUT 80 PERCENT; THE

2000 GOVERNMENT DEFICIT ESTIMATED TO BE AT LEAST 23

PERCENT OF GDP BASED ON THEIR AUDITS AND THE RECENTLY

RELASED SUPPLEMENTAL BUDGET (LARGELY DUE TO INCREASES

IN WAGES, INTEREST AND DEFENSE SPENDING); AND AN

ESTIMATED 5 1/2 PERCENT REAL GDP SHRINKAGE THIS YEAR

WITH AT LEAST A 6 1/2 PERCENT DECLINE EXPECTED NEXT

YEAR. ON THE PLUS SIDE, THE NEW ECONOMIC MINISTERS

(SIMBA MAKONI – FINANCE AND ECONOMIC DEVELOPMENT AND

CONFIDENTIAL

 

PAGE 04       HARARE 05072 01 OF 02 121436Z

NKOSONA MOYO – INDUSTRY AND INTERNATIONAL TRADE)

ADMIT THE GOZ’S ECONOMIC FAILURE TO DATE AND

RECOGNIZE THE NEED FOR SWIFT AND STRONG MEASURES.

THOUGH THE STEPS WERE TOO SMALL AND TOO LATE, THEY

BROKE THE DEADLOCK ON A COUPLE OF KEY ISSUES,

SPECIFICALLY DEVALUATION AND PUBLIC REVELATION OF

SOME, BUT PROBABLY NOT ALL, OF THE COST OF THE

MILITARY IN THE CONGO (Z $10 BILLION OR U.S. $200

MILLION SINCE AUGUST 1998). “AT LEAST THEY ARE NO

LONGER IN DENIAL,” SAID NEUHAUS, “AS THEIR

PREDECESSORS WERE.” WHETHER THEY WILL HAVE THE

LEEWAY TO BE MORE CONSISTENT AND RATIONAL “REMAINS TO

BE SEEN,” HE SAID, AND THEIR ACTIONS OVER THE NEXT

MONTH OR TWO WILL BE EXTREMELY KEY IN DETERMINING IF

THE RELATIONSHIP AWAKES FROM “ITS PRESENT DORMANCY.”

 

4. (C) NEUHAUS THEN WENT ON TO LIST WHA

 

(7 VIEWS)

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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