Central bank governor Gideon Gono raided the foreign currency accounts of several companies to pay US$120 million in arrears to the International Monetary Fund to save the country from being expelled from the organisation.
Masvingo legislator Walter Mzembi said Gono had taken the action in consultation with President Robert Mugabe, but no one else knew about the deal.
The IMF had said Gono consulted Mugabe on even some of the smallest issues.
Full cable:
Viewing cable 05HARARE1269, CENTRAL BANK SWEEPS FOREX ACCOUNTS TO PAY IMF
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
|
Reference ID |
Created |
Released |
Classification |
Origin |
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 03 HARARE 001269
SIPDIS
AF/S FOR B. NEULING
STATE PASS USAID FOR M COPSON
NSC FOR SENIOR AFRICA DIRECTOR C. COURVILLE
TREASURY FOR J. RALYEA AND B. CUSHMAN
USDOC FOR ROBERT TELCHIN
E.O. 12958: DECL: 09/09/2015
SUBJECT: CENTRAL BANK SWEEPS FOREX ACCOUNTS TO PAY IMF
REF: A. STATE 158016
¶B. HARARE 1239
Classified By: Classified By: A/DCM Paul Weisenfeld for reasons 1.4 (b)
and (d)
¶1. (C) Summary. In yet another blow to investor confidence,
and a reflection of the depth to which monetary probity has
sunk, the Reserve Bank of Zimbabwe (RBZ) appears to have
raided private foreign currency accounts to help finance its
unexpectedly large recent arrears payment to the IMF. The
resident business community related systematic incidences of
coerced exchange of foreign currency account balances into
local currency at the official (highly undervalued) exchange
rate, ever-increasing administrative delays in the
disbursement of forex, and the RBZ,s own active
participation in the parallel currency market to raise hard
currency at any cost. End Summary.
¶2. (C) RBZ Governor Gono told the press on August 31 that
the combined arrears payment of US$129 million to the IMF,
World Bank and Africa Development bank was sourced from
exporters and free funds holders. Gono told the recent IMF
mission that part of the payment was sourced from the return
of flight capital, which he described as a positive response
to his tightening of monetary policy (ref B). He praised the
patriotism of exporters in assisting the RBZ to make foreign
currency available for urgent national needs.
¶3. (C) ZANU-PF MP and Chairman of the Parliamentary
Committee on Lands, Land Reform, Agriculture, and
Resettlement Walter Mzembi told econoffs on September 7 that
RZB Governor Gono explained to his committee on September 6
that he had taken a cocktail of measures, including emptying
FCAs (foreign currency accounts), to fund the GOZ,s recent
US$120 million arrears payment to the IMF. Mzembi suggested
Gono had taken the action based on consultation with
President Mugabe alone, and not in broader discussion with
the Cabinet, as some members of the Cabinet had shown
surprise at the step. Mzembi characterized the action as a
&bad move8 that would not restore confidence in Zimbabwe,s
investment climate.
¶4. (C) Numerous members of the business community recounted
tales of the RBZ,s recent sweep of FCAs. The Divisional
Marketing Manager of Meikles Africa Hotels, confirmed to
econoff on September 7 that the RBZ had converted the entire
Meikles, FCA holdings (amount unstated) to Zim dollars at
the official exchange rate (the official rate on September 6
was 1:24,520; parallel rate 1:47,500). She recounted Meikles
Regional Commercial Director Glenn Stutchbury,s assessment
of the action: &daylight robbery8. The Director of Archer
Clothing Manufacturers in Bulawayo told econoff that the
Meikles account had held US$45 million; Archer’s company had
not been affected. He also said he had heard of a safari
company that had lost US$150,000 from its FCA.
5 (C) The CEO of ZimPlats related to Econoff that Vice
President Mujuru had gathered heads of major mining companies
in mid-August to request foreign currency donations to fund
food purchases. Soon after, the GOZ had also approached
ZimPlats privately to seek a donation. ZimPlats did not
provide any funds, but, according to Sebborn, the RBZ
liquidated Rio Tinto,s FCA to the point that its operations
in Zimbabwe could come to a standstill. Sebborn believed the
GOZ was seeking funds from the mining companies to repay the
IMF.
¶6. (C) The Australian Embassy could not confirm the alleged
raid on Rio Tinto,s FCA, but was aware that the RBZ had
recently exchanged the US$2.5 million foreign currency
account balance of Zimpharm, a Harare-based manufacturer of
cosmetics, pharmaceuticals and personal-hygiene products, for
Zimbabwean currency at the official exchange rate. An
Australian diplomat recounted that the RBZ had provided his
embassy a Zimbabwean currency &bonus8 (amount unstated) to
top up the official exchange rate as an incentive to transfer
a large sum of hard currency as construction of a new embassy
begins.
————————
And in our Own Backyard(
————————
7 (C) Founder Jakachira, the financial officer of SafeGuard,
which provides security to all Embassy Harare buildings and
residences, related to Econoff that the RBZ withdrew
US$38,000 (nearly half the balance) from Safeguard,s FCA on
August 11, converted it at 19,000:1, and deposited it back
into a non-FCA account. SafeGuard has sought to access the
remaining foreign currency balance, but the RBZ has
repeatedly rejected the requests based on minor
administrative technicalities. Jakachira believed the RBZ
was waiting for the 21 day forex holding period to pass, when
it would simply confiscate the balance, alleging that the
company had not complied with regulations.
————————————
Working the Lag/Calling in the Forex
————————————
¶8. (C) An executive of the mining sector company GAT
Investments, was one of several businessmen who complained to
Embassy staff that the RBZ was failing to disburse funds
allocated at the twice-weekly auction. His company has not
yet received foreign currency allocated to it at the August 9
auction. (N.B. The auctions allocate Z$12.5 million twice a
week, of which Z$3-4 million go to the private sector while
the rest flows back to the Reserve Bank for urgent food and
fuel purchases, according local economist John Robertson.)
Embassy contacts also commented that the recently implemented
reduction in companies, holding period for foreign currency
from 30 to 21 days had generated a one-time peak in forex
inflow.
———————————
The RBZ Pumps the Parallel Market
———————————
¶9. (C) A Sales Executive at Western Union Money Transfer,
maintained to embassy staff that the RBZ had recently built
up foreign reserves by using agents abroad to buy forex
overseas at the parallel market rate from diaspora
Zimbabweans, who could use the favorably purchased local
currency to finance purchase or construction of property in
Zimbabwe.
¶10. (U) Finally, the Financial Gazette estimated in an
article today that USD-denominated gas sales were a way for
the RBZ to raise forex on the cheap.
——-
Comment
——-
(C) As noted in ref A, the source of Zimbabwe’s recent IMF
repayment does matter. Indeed, built on an unconsented sweep
of FCAs, the payment delivered a severe blow to the integrity
of Zimbabwe,s tenuous banking system. Made ostensibly to
impress the investor community, the payment to the IMF
ironically has shattered any semblance of investor confidence
left in the economy, and paralyzes the operations of the very
companies that have the potential to earn foreign currency.
It further represents an enormous opportunity cost in terms
of foregone imports of desperately needed food, fuel, and
inputs. Indeed, it remains to be fully understood why
Zimbabwe ever made such a large payment under these
circumstances when a much smaller payment would probably have
sufficed to stave off expulsion. What is clear is that this
government’s ruinous policies continue to dig the economy
into a deeper hole and fully support a recommendation of
expulsion from the IMF.
DELL
(57 VIEWS)
0 Comments