Why Gono and Biti clashed over IMF money- Wikileaks

Central bank governor Gideon Gono clashed with Finance Minister Tendai Biti over the $500 million in special drawing rights granted to Zimbabwe by the International Monetary Fund in August 2009 because Gono regarded it as a windfall while Biti urged caution saying the money should be used to reduce the country’s arrears with international financial institutions.

According to one of the cables just released by Wikileaks Biti told United States embassy officials that President Robert Mugabe supported the policy of debt reduction and this information had already been shared in cabinet.

Gono, however, initially consulted Biti on “how to access these funds immediately without any media attention.” The cable says Gono described the SDR allocation as “a windfall and break through.”

This led to a stalemate where the money was unused for months. In a report back Biti said last month the IMF money had been used for several projects but $215 million was still with the IMF as national reserves with another $140 million earmarked for the country’s obligations with the IMF’s poverty reduction growth facility.

He said $150 was used for agricultural inputs in 2009 and 2010, a further $50 million was used for summer cropping, $80.46 million was spent on infrastructure projects and $19.54 was allocated to the Zimbabwe Economic and trade Revival Facility which is being administered by Interfin Bank.

Full cable:

Viewing cable 09HARARE711, GONO STIRS THE POT ON IMF RESERVES

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E.O. 12958: DECL: 09/04/2019

TAGS: ECON EFIN PGOV PREL ZI

SUBJECT: GONO STIRS THE POT ON IMF RESERVES

Classified By: Classified by: CDA Donald Petterson, Reason: 1.4 (b)

¶1. (C) Finance Minister Tendai Biti has told President Mugabe

and the Cabinet that Zimbabwe should use its new allocation

of Special Drawing Rights (SDRs) to clear arrears with the

international financial institutions as part of a debt

reduction strategy. Conrad Nyamurova, an adviser to Biti

told us that Mugabe supports this policy, which Biti had also

communicated to Mugabe by letter and shared in Cabinet with

Mugabe and ministers. Nyamurova also said that Biti had

reportedly been in contact with International Monetary Fund

(IMF) staff and an IMF executive director to make it clear

that, despite the fact that no consultation is mandated,

Zimbabwe would not draw on its SDR balance until it had

agreed upon a strategy with the IMF. Biti plans to discuss

this with IMF staff at the upcoming annual meetings in

Istanbul. (NOTE: Biti has also discussed with us and with

IMF staff using part of the SDR allocation for a public

investment project. END NOTE.)

¶2. (C) The Governor of the Reserve Bank of Zimbabwe, Gideon

Gono, had caused a degree of confusion regarding GOZ policy

on the SDR allocation. In an August 28 letter, Gono sought

to consult with Biti on “how to access these funds

immediately without any media attention.” He described the

SDR allocation as “a windfall and break through.” On

September 3 Gono made veiled public reference to a new source

of official financing. The next day the state-owned press

gave front-page coverage to Gono’s self-proclaimed success in

winning new support from the IMF in a banner head-lined

article, “IMF gives Zim US$500m”. Gono falsely claimed in

the article that Zimbabwe had already received the funds.

——-

COMMENT

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¶3. (C) While Biti is dealing with this issue within

government, his bigger problem may be with the public if

civil servants, including teachers, believe the government

has received a windfall of support and is not using it to

raise salaries. Nyamurova said Biti would publicly address

the issue in the near future. END COMMENT.

PETTERSON

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