Zimdollar Tumbles Further

UNCLAS HARARE 001578 SIPDIS STATE FOR AF/S and AF/EX NSC FOR SENIOR AFRICA DIRECTOR JFRAZER USDOC FOR 2037 DIEMOND PASS USTR FLORIZELLE LISER TREASURY FOR ED BARBER AND C WILKINSON STATE PASS USAID FOR MARJORIE COPSON ¶E. O. 12958: N/A TAGS: ECON EINV PGOV ZI SUBJECT: Zimdollar Tumbles Further ¶1. Summary: The Zimdollar has fallen another 25 percent from Z$3350 to 4200:US$1. End Summary. ¶2. In early May, the Zimdollar still traded at Z$1450:US$1, so the three month devaluation stands at around two-thirds. While a number of factors are weakening the Zimdollar, oil parastatal NOCZIM has been aggressively selling 91-day bonds and converting the proceeds into U.S. dollars for fuel purchases. (Even so, NOCZIM is only supplying subsidized fuel to the GOZ's own vehicles and some commuter vans.) The largest Zimbabwean note is now worth 12 US cents. A Z$ 1 coin, still widely circulated, exchanges for US$.0002. If you carry 42 of these bulky coins in your pocket, you have one US cent. ¶3. Comment: Through accelerating inflation and a weakening Zimdollar, the GOZ is confronted with its failed economic policies. The Zimdollar has nearly fallen below the Zambian Kwacha, currently trading at 4560:US$1, a psychological barrier for a country that once looked down its nose at poorer neighbors. Whitehead