Kuruneri overshadowed by Gono

Zimbabwe’s new Finance Minister Christopher Kuruneri was more outspoken than his predecessor Herbert Murerwa according to United States ambassador to Zimbabwe Joseph Sullivan but he was overshadowed by the flamboyant central bank governor Gideon Gono.

The ambassador said Kuruneri shared the same “logic-chopping biases” of other ZANU-PF stalwarts and understated the devastating effect on exporters of the overvalued Zimdollar while overstating the potential for a near-term agricultural rebound.

Kuruneri had told Sullivan that though he accepted the International Monetary Fund’s prescription for converging auction and parallel rates, he wanted to move more gradually than the IMF suggested.

He agreed with the IMF that a sub-market 30 percent lending rate for the productive sector was fuelling speculation but stressed that the government would soon cap the loan facility, turning it into a revolving fund.

Full cable:

Viewing cable 04HARARE600, Finance Minister Wants Slow Exchange Adjustment

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

UNCLAS SECTION 01 OF 02 HARARE 000600

SIPDIS

SENSITIVE

STATE FOR AF/S

NSC FOR SENIOR AFRICA DIRECTOR JFRAZER

USDOC FOR AMANDA HILLIGAS

TREASURY FOR OREN WYCHE-SHAW

PASS USTR FLORIZELLE LISER

STATE PASS USAID FOR MARJORIE COPSON

¶E. O. 12958: N/A

TAGS: ECON EAID BTIO EINV PGOV ZI

SUBJECT: Finance Minister Wants Slow Exchange Adjustment

¶1. (SBU) Summary: Finance Minister Chris Kuruneri

expressed satisfaction with recent International Monetary

Fund (IMF) Article IV consultations. However, he said

the GOZ prefers a more gradual approach for rationalizing

its overvalued currency and phasing out its hefty tax on

exporters than the IMF delegation prescribed. Kuruneri

also acknowledged a grain deficit larger than 100,000

metric tons and promised to stop the revenue authority

from trying to tax expatriates at U.S. NGOs. End

summary.

¶2. (SBU) Ambassador Sullivan, accompanied by the USAID

mission director and econoff, paid an April 7 courtesy

call on the newly appointed finance minister. Kuruneri

said he welcomed the visit and wanted better relations

with the U.S. He thanked the Ambassador for food and HIV

assistance, and hailed traditional U.S. support for

agriculture through, for example, the Wisconsin Land

Tenure Center.

Kuruneri characterizes IMF concerns

———————————–

¶3. (SBU) Openly apprehensive about a pending IMF verdict

in July, the Finance Minister cited numerous issues

arising from consultations:

– Market-Driven Exchange Rates. Kuruneri said he accepted

the IMF prescription for converging auction and parallel

rates, but wanted to move more gradually than the IMF

suggested. He considers the effect on exporters of the

official Z$824:US$ rate less severe than the IMF.

However, he reiterated that Reserve Bank (RBZ) Governor

Gideon Gono will address exchange rate concerns in a

follow-up policy statement, now postponed until late

April.

– Arrears Payments. Kuruneri restated the GOZ’s intent

to remit US$1.5 million per quarter toward its IMF

arrears (currently US$290 million). The GOZ has

restarted, then curtailed, these payments several times

since 2001.

– Sub-market Lending Rates. He agreed with the IMF that

a sub-market 30 percent lending rate for the productive

sector (heavily negative in real terms) was fueling

speculation. Kuruneri stressed that the GOZ will soon

cap the loan facility, turning it into a revolving fund.

Rates will eventually move toward the market.

– Parastatal Support. Acknowledging that the Grain

Marketing Board (GMB), National Oil Company of Zimbabwe

(NOCZIM) and other parastatals are major budget drains,

the Finance Minister concurred with the IMF

recommendation that State-owned firms rationalize pricing

as soon as possible. The 2004 budget called for similar

measures.

Land Reform, Taxation of NGO Expats

———————————–

¶4. (SBU) In addition, Kuruneri admitted:

– The GOZ made mistakes in redistributing land. Himself

a land-reform beneficiary, Kuruneri predicted

optimistically that 2004/05 yields could equal those of

the late-1990s.

– The country’s food deficit will exceed those of recent

GOZ estimates. He said he would urge the Ministers of

Agriculture and Labor/Social Welfare to speed up an

appeal to the donor community.

– The revenue authority (ZimRA) had no right to tax

expatriates working for U.S. NGOs. He promised to speak

with ZimRA officials.

Comment

——-

¶5. (SBU) Despite ongoing embezzlement accusations against

Kuruneri, the new minister clearly comes down on the

moderate side of the GOZ. He is more outspoken than his

predecessor, Herbert Murerwa, but remains overshadowed by

flamboyant RBZ Governor Gono. At the same time, Kuruneri

shares the same logic-chopping biases of other ZANU-PF

stalwarts. He understates the devastating effect on

exporters of the overvalued zimdollar and overstates the

potential for a near-term agricultural rebound. On the

whole, however, he is probably among the more reasonable

cabinet ministers.

Sullivan

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