US tries to dictate the course for Zimbabwe

The United States embassy hosted a reception for an International Monetary Fund mission team, barely a month after the swearing in of the inclusive government, and tried to dictate to the team what was wrong with Zimbabwe.

US ambassador to Zimbabwe James McGee briefed the team on 8 March 2009 on the lack of political will among top ZANU-PF officials to make the three-week-old inclusive government work.

He also briefed the team on the incompetence and corruption of central bank governor Gideon Gono, stressing that the donor community’s opinion was that Gono must go before donor support could flow.

Full cable:

Viewing cable 09HARARE204, DONORS BRIEF IMF TEAM ON EVE OF MEETINGS WITH ZIM

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UNCLAS SECTION 01 OF 02 HARARE 000204

SENSITIVE

SIPDIS

AF/S FOR B. WALCH

AF/EPS FOR ANN BREITER

NSC FOR SENIOR AFRICA DIRECTOR MICHELLE GAVIN

STATE PASS TO USAID FOR L.DOBBINS AND J. HARMON

TREASURY FOR D. PETERS

COMMERCE FOR ROBERT TELCHIN

ADDIS ABABA FOR USAU

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E.O. 12958: N/A

TAGS: ECON EFIN PGOV PREL ZI

SUBJECT: DONORS BRIEF IMF TEAM ON EVE OF MEETINGS WITH ZIM

GOVERNMENT

——-

SUMMARY

——-

¶1. (SBU) On March 8, Ambassador McGee and key like-minded

ambassadors briefed the IMF Article IV mission team on the

lack of political will to make the inclusive government work

among top ZANU-PF officials, the dire state of Zimbabwe’s

public finances, and the incompetence and corruption of

Reserve Bank Governor Gideon Gono. Post is facilitating

meetings for the IMF mission with industry leaders to ensure

it is well informed of business conditions here. In

addition, we encouraged the mission to issue a press

statement with its recommendations at the conclusion of the

visit. END SUMMARY.

——————————————— —

Donor Ambassadors Brief IMF Mission Upon Arrival

——————————————— —

¶2. (SBU) On March 8, Ambassador McGee hosted a reception for

the IMF Article IV mission to brief the IMF’s new Zimbabwe

team on the political and economic situation in the country.

The IMF mission will conduct meetings with GOZ officials and

the business and donor communities in Harare from March 9-25.

Joined by EU Ambassador Xavier Marchal, German Ambassador

Albrecht Conze, Canadian Ambassador Barbara Richardson,

UK/DFID Economic Advisor Stuart Tibbs, DCM, USAID Director

and Econoff, Ambassador McGee told the mission that top

ZANU-PF officials lacked the political will to make the

government of national unity work. He also impressed upon

the mission the dire state of Zimbabwe’s public finances.

Concerned that the IMF might tolerate Gideon Gono remaining

Governor of the Reserve Bank of Zimbabwe (RBZ), the

ambassadors reiterated the donor community’s opinion that

Gono must go before donor support could flow. Ambassador

McGee also shared with the mission the donor community’s five

principles of re-engagement and examples of benchmarks for

operationalization of the principles.

———————–

Filling the Revenue Gap

———————–

¶3. (SBU) Cognizant of the steep shortfall in revenue and the

GOZ’s ambitious commitment to pay civil servants in foreign

exchange, mission chief Vitalyi Kramarenko pressed the

diplomats for suggestions of possible new revenue sources for

the government, suggesting increased taxation of the wealthy,

perhaps including higher property taxes. DFID’s Tibbs

pointed out the tiny size of the formal economy and the

government,s dependence, for now at least, on VAT returns

for tax revenue. Ambassador McGee commented that most of the

new personal wealth in Zimbabwe was derived from informal or

illicit activities. Ambassador Richardson related that

Canada,s two gold companies in Zimbabwe planned to increase

production now that the gold price had been freed. She said

Qproduction now that the gold price had been freed. She said

the current high world gold price could contribute to tax

revenues, but not immediately.

——————————————— –

Enhanced Humanitarian and Technical Assistance

——————————————— –

HARARE 00000204 002 OF 002

¶4. (SBU) Regarding the acute need for budget support, in

particular to pay school teachers, Tibbs expressed the UK

government’s concern that enhanced humanitarian assistance of

this type lacked an “exit strategy.” He said his government

also feared that ZANU-PF could perceive the assistance as

donor willingness to provide immediate support regardless of

progres on the principles of re-engagement. On the dire

need for technical assistance (TA) to the ministries,

especially the Ministry of Finance, Kramarenko said the IMF

was prohibited from providing TA to Zimbabwe at the moment,

but staff could consider seeking a one-time exception from

the IMF Board. In any case, it would cover no more than 1-2

experts.

¶5. (SBU) Ambassador McGee welcomed news that Sharmini Coorey,

former mission chief to Zimbabwe, would join the mission for

its final three days in Harare. The mission will meet again

with the like-minded donor group on March 16 and give a “Week

One” status report. In addition, it has sought and received

Post’s assistance in arranging meetings with industry leaders

in banking, agriculture, and accountancy. Post has also

arranged an overview on business conditions by the American

Business Association of Zimbabwe (ABAZ) as well as meetings

for the mission with key exporters: gold, platinum, and

diamond producers; tobacco producers; and cotton producers.

Ambassador McGee encouraged Kramarenko to convey the

mission’s recommendation to government in a press statement

at the conclusion of its mission. If the mission decided to

issue a statement, Kramarenko said it would possibly

recommend an audit of the RBZ and the return of all budgetary

responsibility to the Ministry of Finance; he said the

mission could not recommend Gono’s removal. Finally, the team

agreed to participate in a March 20 DVC with members of the

Washington donor’s conference.

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COMMENT

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¶6. (SBU) The IMF mission members are for the most part new to

Zimbabwe. On the eve of their meetings with government, in

particular with the RBZ, we sought to alert them to the

problem of political will and to the incompetence and

corruption of Gideon Gono’s stewardship of the RBZ. While we

were struck by some of the mission chief’s unrealistic

initial thoughts on tax revenue sources, the ensuing thirteen

days of meetings with government officials and the business

and donor communities should provide the team with ample

information to identify where the rot lies and advise the GOZ

on the best way forward. We will continue to encourage the

mission to issue a press statement with recommendations at

the end of their visit, in particular to clarify the notion,

reported on the front page of today’s The Herald, of “IMF

Qreported on the front page of today’s The Herald, of “IMF

ready to assist Zim.” END COMMENT.

MCGEE

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