Zimbabweans evade official exchange rate

UNCLAS HARARE 001361

SIPDIS

STATE FOR AF/S
USDOC FOR AMANDA HILLIGAS
TREASURY FOR OREN WYCHE-SHAW
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON


E. O. 12958: N/A
TAGS: ECON ETRD EINV PGOV ZI
SUBJECT: Zimbabweans evade official exchange rate


1. Summary: The Reserve Bank (RBZ) is playing cat-and-
mouse with parallel traders. Since prohibiting payouts
for remittances in foreign exchange, business is
migrating to Zambia. End summary.

75 Percent Drop in Western Union Transfers
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2. The RBZ decreed July 28 that transfer agencies such as
Western Union could no longer make payments in foreign
exchange and must convert incoming funds at the official
(auction) rate. Since then, weekly remittances handled
by Western Union of Zimbabwe have fallen precipitously
from US$2 million to 500,000. Western Union's local
director told us his branches are still receiving smaller
amounts from abroad. However, customers are now routing
larger quantities (over US$1,000) through branches in
Zambia. Zimbabweans apparently travel across the border
to receive the funds and exchange them at parallel rates.

Comment
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3. The RBZ remains more committed than ever to
overvaluing the zimdollar and dampening the parallel
market. As the speedy 75 percent drop in Western Union
business demonstrates, however, Zimbabweans are equally
committed to getting fair value for forex. In the end,
the GOZ may realize it underestimated the resourcefulness
of its population.

Sullivan