Indigenous banks like the Commercial Bank of Zimbabwe had found a niche market offering tax-evasion assistance for exporters that they were not likely to stop this practice despite the announcement of a new exchange rate by the government.
This was the comment of United States ambassador to Zimbabwe Joseph Sullivan to news that the government had approved a new exchange rate through which exporters could get half of their money at a rate of Z$800: $1 and the remainder at Z$55: 1.
Sullivan said some exporters were already getting rates of Z$1 400 or more so they were not likely to be drawn back into the fold.
Central bank governor Gideon Gono was the chief executive officer of CBZ at the time.
Viewing cable 03HARARE433, What is Zimbabwe’s new exchange rate?
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS HARARE 000433
STATE FOR AF/S
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
PASS USTR ROSA WHITAKER
TREASURY FOR ED BARBER AND C WILKINSON
STATE PASS USAID FOR MARJORIE COPSON
¶E. O. 12958: N/A
SUBJECT: What is Zimbabwe’s new exchange rate?
Ref: Harare 347
¶1. (SBU) Summary: Businessmen in Zimbabwe have spent the
past week trying to figure out how the GOZ’s new export
support mechanism will work. Although different
interpretations abound, two cabinet officials apparently
reassured a group of prominent CEOs yesterday that
exporters would enjoy a significant devaluation. End
¶2. (U) In reftel, we explained that exporters may
exchange 50 percent of earnings at 800:1. Then we
offered two scenarios for the other 50 percent: exchange
at the official rate of 55:1 (1st option) or gain access
to it in foreign currency — presently, an effective
market rate of 1420:1 (2nd option). On the other hand,
some locals have been told the GOZ means to offer
exporters a flat rate of 800:1 for their entire revenue
(3rd option). A parallel but equally important debate
centers on whether importers may access U.S. dollars at
800:1. Businessmen have complained to us that neither
the Finance Ministry nor Reserve Bank has been willing to
clarify the policy. The businessmen can only wait for
the law’s official printed version, which may appear in
the government gazette within a few days. Given that
companies are shutting down or cutting back operations at
an alarming pace, a clear enunciation of Zimbabwe’s
exchange rate is crucial.
The Latest Word from Govt
¶3. (SBU) The Finance Director of a large corporation told
us that his and several other CEOs met yesterday
afternoon with Vice President Simon Muzenda and
Information Minister Jonathan Moyo to plead for
clarification. They were apparently told the GOZ has
“nearly” decided on a hybrid of the second and third
options described above. Exporters must exchange the
first 50 percent of revenue at 800:1. They then deposit
the second 50 percent in the Reserve Bank and apply for
permission to use it for qualified imports, permitting —
if granted — an effective rate of 1420:1 currently on
the parallel market). The blend rate would be over
1100:1. If exporters are unsuccessful convincing the GOZ
to allow them access to the second 50 percent held in
forex within 60 days, they also receive the other 50
percent at 800:1.
¶4. (SBU) If true, this is not the worst of scenarios.
Companies tell us 800:1 is the minimum effective rate
needed to restart exports. However, those exporters
still in operation have grown accustomed to sheltering
earnings offshore and enjoying a market rate of 1400 or
higher. Since the GOZ’s export-unfriendly budget
statement in November, in fact, indigenous banks like CBZ
have found a new niche offering tax-evasion assistance
for exporters. The GOZ will have a difficult job drawing
them back to the fold.