ZIMBABWE'S ARREARS TO THE WORLD BANK

C O N F I D E N T I A L HARARE 002895

SIPDIS

STATE FOR AF, AF/S, AF/EPS, EB/IFD/ODF
TREASURY FOR ED BARBER, GRACE SONE
USDOC FOR ERIC HENDERSON
STATE PASS USTR/RWHITTAKER
NSC FOR SENIOR AFRICA DIRECTOR GAYLE SMITH

E.O. 12958: DECL: 05/31/10
TAGS: EFIN PGOV ZI
SUBJECT: ZIMBABWE'S ARREARS TO THE WORLD BANK
CONFIDENTIAL


PAGE 02 HARARE 02895 010707Z

CLASSIFIED BY ECON/COMM OFFICER MARK PROKOP, REASONS
1.5 (B),(D)

REF: HARARE 2817


1. (C) ECON OFFICER RECENTLY LEARNED FROM THE WORLD
BANK'S RESIDENT REPRESENTATIVE THAT ZIMBABWE'S
ARREARS TO THE IBRD AS OF MAY 29 TOTALED
APPROXIMATELY U.S.$18 MILLION. INSTALLMENT PAYMENTS
FROM ZIMBABWE TO THE BANK ARE DUE FORTNIGHTLY, AND
ARE USUALLY IN THE U.S. $4 TO $5 MILLION RANGE,
THOUGH SOME PAYMENTS CLIMB TO $8 OR $9 MILLION,
DEPENDING ON THE REPAYMENT SCHEDULES OF PREVIOUS
LOANS. ANOTHER PAYMENT WAS DUE ON MAY 30, WHICH
WOULD BRING THE NOW 75 DAYS IN ARREARS TOTAL TO
APPROXIMATELY $23 MILLION.


2. (C) DUE TO THE PLEDGING OF A LARGE SHARE OF THE
TOBACCO SALES EXPORT RECEIPTS FOR FUEL AND ENERGY
PAST-DUE BILLS (REFTEL),THE HARD CURRENCY SHORTAGE
PERSISTS AT NEAR CRISIS LEVELS AND IT IS NOT EXPECTED
TO EASE ANYTIME SOON. THEREFORE, WE ANTICIPATE THAT
THE GOZ WILL HAVE DIFFICULTY MAKING THESE PAYMENTS,
THE MORE SO AS THE BALANCE INCREASES. ACCORDING TO
THE WORLD BANK RESREP, GOVERNMENT OFFICIALS SEEM
RELATIVELY NONPLUSSED ABOUT THE ARREARAGE, WITH THE
RESERVE BANK GOVERNOR STATING THAT THOUGH HE IS DOING
HIS BEST, EVEN HE CANNOT GET BLOOD FROM A TURNIP.


3. (C) WHEN ASKED WHAT THE OUTLOOK WAS FOR
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RESUMPTION OF LENDING AND FURTHER FINANCIAL SUPPORT,
THE RESIDENT REPRESENTATIVE STATED THAT AFTER THE
ELECTIONS DIALOGUE WOULD HAVE TO START AFRESH WITH A
CABINET WITH NEW MEMBERS, AND A DETERMINATION MADE
THEN ON WHETHER OR NOT THE TWO BRETTON WOODS
INSTITUTIONS WOULD EVEN WANT TO REENTER THE MARKET
HERE. "A LOT OF BAD THINGS CAN HAPPEN BETWEEN NOW
AND THEN, MATE" HE CONFIDED (THE RESREP IS AN
AUSTRALIAN),"AND THE NEW GOVERNMENT CAN CONTINUE TO
BE NON-COOPERATIVE." HE CONTINUED THAT AS A
NECESSARY FIRST STEP THE IMF WOULD HAVE TO GET GOZ
AGREEMENT TO START A SHADOW PROGRAM, THAT WOULD NEED
TO LAST AT A MINIMUM FOUR OR FIVE MONTHS. TO SAVE
TIME, THIS SAME PERIOD COULD BE USED TO WORK OUT THE
TERMS AND PERFORMANCE CRITERIA OF A NEW IMF FACILITY.


4. (C) ONCE THE IMF GIVES THE GREEN LIGHT, THEN THE
ALREADY-APPROVED AFRICAN DEVELOPMENT BANK FUNDS COULD
BE RELEASED (APPROXIMATELY U.S. $45 MILLION),HE
EXPLAINED, AND AT THE SAME TIME THE WORLD BANK AND
THE EU COULD RESUME DISCUSSIONS ON THE PATH FORWARD.
HOWEVER, HE POINTED OUT, IF THE ARREARS SITUATION
CONTINUES OR WORSENS, THEIR HANDS WILL BE TIED. THE
WORLD BANK PLANS TO HOST A QUARTERLY ALL-DAY DONORS
DISCUSSION ON MAY 31, AT WHICH THE FOREGOING TOPICS
AND A HOST OF OTHER ISSUES WILL BE DISCUSSED IN
DEPTH. THE MISSION WILL BE REPRESENTED AT THAT
GATHERING BY THE USAID DIRECTOR.

MCDONALD

CONFIDENTIAL