Mutasa agrees to zero-tolerance of farm disruptions


Minister of State Security and Lands Didymus Mutasa had pledged to halt any farm disruptions, particularly where the central bank or any other bank held a farmer’s loan, central bank governor Gideon Gono said in January 2006.

He said Mutasa would use all powers vested in him “and other machinations of government” to stop disturbances.

Gono also told the diplomatic community that neither drought nor land reform would be a valid excuse for importing food in 2006.


Full cable:



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Reference ID






2006-01-30 16:26

2011-08-30 01:44


Embassy Harare

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 SECTION 01 OF 04 HARARE 000098









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




REF: (A) HARARE 97 (B) HARARE 96 (C) HARARE 46 (D) 05

HARARE 1485 (E) 05 HARARE 1018


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






1. (SBU) Reserve Bank Governor Gideon Gono,s Quarterly

Monetary Policy Review Statement of January 24 failed to

present policy changes to stem Zimbabwe,s economic

implosion. Gono conceded that Zimbabwe,s officially

reported mid triple-digit inflation had not yet peaked.

Tacitly admitting events were beyond his control, Gono

asserted that the best hope for a turnaround lay in improved

exogenous factors like rainfall, the world oil price, and

western sanctions policy. He also appealed for a clampdown

on corruption and mismanagement of parastatals and local



2. (SBU) After loosening management of the forex market and

allowing the currency to depreciate by two thirds in the past

quarter, Gono reasserted control by tying movement in the

rate to minimum trade volumes, effectively paralyzing the

interbank market (ref A). Again, he called for zero

tolerance of farm disruptions, this time claiming to have the

full support of Lands Minister/Security Minister Mutasa. He

raised eyebrows with a reference to the regime’s concerns

over possible food riots (ref B) and reached out to the

diplomatic community over sanctions, which he said had

wreaked havoc on the lives of ordinary Zimbabweans. The

Monetary Policy Review Statement for the Fourth Quarter 2005

and seven supplements to the Statement are available at End Summary.



Inflation to Peak at 700-800 Percent in March



3. (U) In his Statement, Gono acknowledged the RBZ,s losing

battle against inflation. He forecast:


— a continued upswing in the rate of inflation to a peak of

700-800 percent in March;


— inflation falling to under 500 percent in June 2006;


— a further drop to 200-300 percent by year-end.


(N.B. Gono had maintained in October (Ref D) that the rate

would fall to 280-300 percent by December 2005; his July

Statement forecast 80 percent at end-2005 (Ref E); the

official inflation figure for 2005 was 585 percent (Ref C).

More reliable sources put the current rate at over 1000



4. (SBU) Gono maintained that inflation was being driven by:

the high annual M3 money supply growth (i.e. the stoked up

printing of currency, up 411 percent in November 2005, up

from 177 percent in January 2005) in support of the

agricultural sector; supply bottlenecks attributable to

drought; declining forex earnings; a sharp downturn in gold

deliveries; high international oil prices; and parallel

market activities.


5. (SBU) In his address to the diplomatic community on

January 25, Gono said high-level government officials had

warned him that if Zimbabwe hit quadruple-digit inflation he

would be out of a job. (N.B. That would be the

official/official rate.) Asked by one ambassador what policy

measures were in place to tame inflation that had not been in

place in 2005, Gono said 2005 had been marked by &political

slippages8 due to the March and November elections, and the

formation of a new government, whereas 2006 was a &clear

calendar8 politically. Furthermore, the rainy season was

bountiful; the world oil price had stabilized; debt servicing

would be less in 2006 than the US$200 million paid down in

2005; and, lastly, a purported lifting of sanctions would

lead to an economic takeoff.



External Sovereign Debt



6. (SBU) Gono announced to the diplomats that the GOZ had

paid down a further US$25 million in arrears to the IMF

General Resources Account since the last Monetary Statement,

leaving Zimbabwe &US$14.5 million away from claiming back

its voting rights at the IMF.8 He also told the diplomatic

community that he would undertake a road show in 2006 to seek

a Paris Club debt treatment. The British Ambassador

responded by pointing out that the introduction of sound

economic policies, drafting of a poverty reduction strategy

in consultation with civil society, and engagement with the

international financial institutions were prerequisites for

any consideration of debt relief for Zimbabwe.


——————————————— —

A Cap on Movement in the Foreign Exchange Market

——————————————— —


7. (SBU) Gono’s policy statement reasserted control over the

foreign exchange market after the exchange system’s

liberalization in October (Ref B) led to over 50 percent

depreciation of the currency in the fourth quarter (septel).

The Governor introduced a new policy of linking movement in

the interbank market rate to the volume of forex traded.

Effective immediately, the new regime put a two percent cap

on daily movement in the exchange rate at volumes of US$15

million and above, and prohibited adjustment when less than

US$5 million is traded. (N.B. Banking sector contacts tell

us that daily volume has never exceeded US$5 million since

inception of the interbank trading system in October.) While

reiterating in principle his commitment to gradually

loosening the RBZ,s management of the exchange rate, Gono

defended the policy change by pointing out that 100 exporters

account for 95 percent of all forex generated in Zimbabwe.

In his view, the Zimbabwean forex market was too thinly

traded to free up &in a big-bang approach.8



Cold Water on New Currency; New Z$50,000 Note



8. (SBU) Gono conceded to the diplomatic community that given

the inflation rate, he would not implement a new currency in

2006, as foreseen in his October Statement and reasserted in

the January Statement. He did announce the introduction on

February 1 of a new higher denomination Zimbabwean dollar

bearer cheque of Z$50,000. (N.B. To the relief of all

Zimbabweans as the bricks of currency weighing down satchels

and bursting consumers, tote bags have continued to grow for

the past half year.)


“Zero-Tolerance” of Farm Disruptions – Again



9. (SBU) Gono reiterated the call in his October Statement

for zero tolerance of farm disruptions. He maintained that

he had a &viable understanding8 from Didymus Mutasa, the

Minister responsible for State Security, Lands, Land Reform

and Resettlement, that Mutasa would halt any farm

disruptions, particularly where the RBZ or any other

Zimbabwean bank held a farmer,s loan. He said Mutasa would

use all powers vested in him &and other machinations of

government8 to stop disturbances. (N.B. The January 26

Financial Gazette, of which Gono is a principal shareholder,

reported instances of Mutasa’s intervention to thwart recent

attempted farm dispossessions.)   Gono also told the

diplomatic community that neither drought nor land reform

would be a valid excuse for importing food in 2006.



Railing Against Corruption



10. (SBU) Central both to the Governor,s televised delivery

of the Policy Statement and to his presentation to the

diplomatic community was a strident attack on corruption and

mismanagement. At the diplomatic briefing, he lambasted

corruption at high levels of government in fuel distribution

and in the mining sector. Citing the precipitous decline in

gold deliveries (from 21,342 kg in 2004 to 13,453 kg in 2005)

at the same time that power usage in the sector was on the

rise, Gono calculated that 9,000 kg of gold had likely been

smuggled out of the country in 2005. He vented particular

wrath on small-scale producers and associated culprits in

government who, he said, were going &scot-free8. He also

railed against the &dependency syndrome8 and &insatiable

appetite for free money8 of parastatal managers and local

authorities warning them to &shape up or be honorable enough

to ship out.8


——————————————— –

Sanctions &Wreaking Havoc on Poor Zimbabweans8

——————————————— –


11. (SBU) In a 15-page Supplement (&An Analysis of the

Socio-Economic Impact of Sanctions Against Zimbabwe8) to the

Monetary Statement and in his address to the diplomatic

community, Gono maintained that sanctions had wreaked havoc

on ordinary Zimbabweans. In the form of either &declared or

undeclared sanctions,8 they had blocked international

financial institution engagement and balance of payments

support, caused an exodus of NGOs (not mentioning the GOZ’s

harassment and increasing repression of NGOs), and scared

away donor assistance.


12. (SBU) To the diplomatic community he said the GOZ

understood &the message8 of sanctions, but it was time to

&build bridges.8 &We,ll meet you halfway,8 he said.

Addressing the British Ambassador, Gono said, &Just as the

good rains after drought wash away the sins and misdeeds of

the past, the diplomatic community should implore its

governments to wash away the past. The reaction, I assure

you, will be positive.8 He called on the British Ambassador

to spearhead a debate on lifting sanctions. (N.B. The

British Ambassador left post permanently on January 29).


Other Measures Announced



13. (U) Further new policies/recommendations announced

January 24 included:


— revision of the amount of export funds retained and

exchangeable at the interbank rate from 70 percent to 82.5

percent; 17.5 percent of export funds (down from 30 percent

previously) are to be sold to the RBZ at the official auction



— revision of the official auction rate from Z$26,000:US$ to



— shortening of the Foreign Currency Account (FCA) retention

period from 45 days to 30 days for private companies,


— requirement that parastatals keep all forex with the RBZ,


— an increase from Z$300,000 to Z$5 million (about US$31 on

the parallel market) in the amount travelers may take out of

the country,


— ongoing revision of interest rates in line with inflation

to maintain positive real interest rates.


Further economic performance figures announced:


— Total export shipments in 2005 amounted to US$1.42

billion, a decline of 9.04 percent from the 2004 figure of

US$1.58 billion.


— Foreign exchange inflows into the formal market declined

from US$1.71 billion in 2004 to US$1.70 billion in 2005.






14. (C) Overall, Gono,s Statement was woefully short on

policy prescriptions to arrest the economic implosion, and

reaction has been largely negative (ref B). We remain

convinced that the GOZ is incapable of taking the first steps

across that two-way bridge that Gono so expressively

depicted. Gono may yet avoid being the scapegoat for the

nation’s economic disaster as rumors grow of impending

high-level GOZ dismissals. He is resented by many but

probably remains potentially useful to those among the ruling

clique and aspiring successors who are already posturing to

appeal to the West as the Mugabe succession game plays out.



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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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