AMBASSADOR'S INITIAL CALL ON RBZ GOVERNOR GONO

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001598

SIPDIS

AF/S FOR BNEULING
NSC FOR SENIOR AFRICA DIRECTOR C. COURVELLE, D. TEITELBAUM
USDOC FOR AMANDA HILLIGAS, TREASURY FOR OREN WYCHE-SHAW,
PASS USTR FOR FLORIZELLE LISER, STATE PASS USAID FOR
MARJORIE COPSON

E.O. 12958: DECL: 12/31/2009
TAGS: ECON ETRD PGOV ZI EINV
SUBJECT: AMBASSADOR'S INITIAL CALL ON RBZ GOVERNOR GONO

Classified By: Ambassador Christopher Dell for reason 1.5 d

Summary
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1. (C) Reserve Bank Governor (RBZ) Governor Gideon Gono told
Ambassador Dell that he is pursuing closer ties with the
International Monetary Fund (IMF) by boosting arrears
payments, trying to facilitate a meeting between President
Mugabe and IMF Managing Director Rodrigo Rato and arranging
for an IMF technical visit Nov 17-23. Gono argued that he
has begun to revive the economy in nearly ten months on the
job by attacking inflation and taking other measures.
Despite criticisms, he indicated he would continue to
intervene in policies outside traditional central banker
duties, such as modifying the NGO bill and bringing together
hostile groups.

Gono Courts the IMF
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2. (C) During the Ambassador's initial visit to the Reserve
Bank, Gono insisted he wanted Zimbabwe to reengage with
Western countries and international lending institutions.
Arguing that President Mugabe was "amenable when approached
in the proper way," Gono claimed to have worked hard to
successfully convince Mugabe to meet IMF Managing Director
Rato. Mugabe was to have met Rato during the Sept 8-9
African Union Extraordinary Summit in Ouagadougou. However,
miscommunication, which he blamed on &bureaucrats8 in the
President,s office, caused the Ouagadougou meeting to fall
through. Gono said he had threatened to resign if a
Mugabe-Rato meeting did not take place during the opening of
the 59th United Nations General Assembly in New York. He
said the meeting had been agreed for September 20 but he had
yet to get a readout or even confirmation that it had
occurred.


3. (C) Gono said he has made tentative arrangements for an
IMF delegation to visit Harare Nov 17-23. He said he had
persuaded acting Finance Minister Herbert Murerwa to move
forward his 2005 budget presentation to Parliament by one
week to Nov 18, which will enable the IMF delegation to
review next year's budget during the visit. Although Gono
has now increased Zimbabwe's quarterly arrears payments to
the IMF to US$5 million, he complained that the IMF's
decision to close its Harare office had enabled adversaries
to claim his reengagement efforts were failing.

Steps to Revive Economy
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4. (C) After recounting familiar GOZ policy that brought
about Zimbabwe's economic collapse - unbudgeted payouts to
"War Veterans" in 1997, the beginning of intervention in the
Democratic Republic of the Congo in 1998, etc. - Gono
summarized his objectives since taking office Dec 1, 2003.
Above all, the Central Banker said he has sought to reduce
inflation, which peaked at a monthly 33 percent last November
and is now below 10 percent. Gono added that he wanted to
reassert regulatory authority over the financial sector,
eliminate remaining price controls, draw business activity
from the informal to formal sector, make quarterly instead of
semi-annual monetary policy statements and introduce
"controlled" foreign exchange currency auctions. He believes
he is gradually succeeding at each of these goals and pointed
out that 2004 gold exports had already surpassed 16 tons, up
from 12 tons during all of 2003.

Zimbabwe's Central Banker Plus
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4. (C) Insisting that Zimbabwean politics and economics are
inextricably linked, Gono said "I make no apology" for
intervening in GOZ matters unrelated to monetary policy. In
that spirit, Gono argued he was trying to tone down the
restrictive NGO bill. Gono said he has used his Foreign
Exchange Auction Advisory Board to promote dialogue among
such diverse groups as the Commercial Farmers Union, War
Veterans and National Association of Non-Governmental
Organizations. (N.B. The opposition Movement for Democratic
Change and independent Zimbabwe Congress of Trade Unions have
refused to participate on the Board.) Regarding Zimbabwe's
besieged white farmers, Gono said he wanted to be able to
tell them "to get on with their work."
Comment

5. (C) Gono seeks rapprochement with the West because he
wants balance-of-payments support to underwrite economic
restructuring. IN that regard, his views echoed similar
remarks we have heard from the local business community which
believes balance-of-payments support from the International
Financial Institutions (IFIs) is their only hope for
recovery. Neither Gono nor the businessmen were willing to
acknowledge that questions of improved governance and respect
for democratic principles were the sine quo non of a revived
relationship with the IFIs. For that reason, he has become
the GOZ's designated reengagement advocate and barbarian
handler par excellence. Yet although President Mugabe has
granted Gono wider latitude than predecessor Leonard Tsumba,
Gono has been unable to prevail upon Mugabe to lessen
repressive tactics against the opposition, independent press,
remaining white farmers and NGOs - or even more pertinent to
his principal responsibilities, to wean the GOZ off its
overvalued exchange rate and the harsh administrative
controls used to maintain it.
Dell