BITI ON THE ECONOMY, SANCTIONS, AND MUGABE

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000296 SIPDIS AF/S FOR B.WALCH DRL FOR N. WILETT ADDIS ABABA FOR USAU ADDIS ABABA FOR ACSS NSC FOR SENIOR AFRICA DIRECTOR MICHELLE GAVIN STATE PASS TO USAID FOR J. HARMON AND L. DOBBINS E.O. 12958: DECL: 04/08/2019 TAGS: PGOV EFIN PHUM PREL ASEC ZI SUBJECT: BITI ON THE ECONOMY, SANCTIONS, AND MUGABE REF: A. HARARE 278 ¶B. HARARE 260 Classified By: Ambassador James D. McGee for reason 1.4 (d) -------------- SUMMARY -------------- ¶1. (C) The Ambassador, accompanied by visiting Staffdel Smith, met April 8 with Minister of Finance Tendai Biti. Biti briefly reviewed the current budgetary situation and discussed Reserve Bank of Zimbabwe (RBZ) Governor Gideon Gono, President Robert Mugabe's role in the new government, the Zimbabwe Democracy and Economic Recovery Act (ZDERA),the recent Cabinet retreat, and his upcoming trip to Washigton for Bretton Woods meetings. END SUMMARY. -------------- On the Budget and Gono -------------- ¶2. (C) Biti said the GOZ was only taking in about US$25 million a month in revenues. (NOTE: The recent IMF Mission estimated that the GOZ took in $30 million in February and might achieve $50 million in March. END NOTE.) This was almost enough to pay US$100 civil servant allowances, but left nothing for recurrent government expenses. He estimated total monthly expenses at US$100 million. So far, the government had been using revolving credit from commercial banks; the banks had been extremely helpful. He added he was hoping that through "humanitarian plus" assistance, particularly in the health and education areas, donors could defray some recurrent GOZ obligations to allow the Ministry of Finance to focus on civil servant salaries. ¶3. (C) Biti reviewed his accomplishments to date (Ref B), and said he was trying to comply with suggestions of the IMF team that recently visited Zimbabwe, including to audit for ghost civil servant personnel, to institute a workable public finance management system, and to adopt procedures for the use of multiple currencies. ¶4. (C) On the hot-button issue of Gono, Biti said this was academic. "We have dealt with his mischief." He could no longer print money, quasi-fiscal activity had ended, government accounts were no longer at the RBZ, but were with commercial banks, forex surrender requirements had been removed, and FCAs (foreign currency accounts) were now protected from the reach of the RBZ. -------------- Help from Mugabe -------------- ¶5. (C) While Biti would not go as far as his colleague, Minister of Economic Development Elton Mangoma, to say the MDC hoped Mugabe remains in power for a while (Ref A),he did say that the new government would not have achieved what it has without Mugabe. Mugabe had been helpful with his revised budget (Ref B) and at the recent SADC Summit in Swaziland where the GOZ was seeking financial assistance. Biti also noted that Cabinet Secretary in the President's office Michek Sibanda (a known hardliner) had sent letters to cabinet officials ordering efforts to deal with IMF recommendations and to expedite an audit of ghost workers. Finally, Biti said he had met the previous day with German businessmen and Qsaid he had met the previous day with German businessmen and Mugabe. Mugabe had acknowledged the need for investment protections and democratization, and had accepted that indigenization needed to be done carefully so as not to deter investment. HARARE 00000296 002 OF 002 -------------- From Skeptic to Optimist -------------- ¶6. (C) Stressing that he had been reluctant to enter into an agreement with ZANU-PF and enter a new government, Biti said he was fully committed to the new government and optimistic about its prospects. Progress had been much more rapid than he could have imagined. The Cabinet retreat, in his opinion, had been a huge success with an enhanced sense of compatibility between ZANU-PF and MDC and a shared commitment to work on 100-day plans in sectors spanning the work of government. Biti was particularly impressed that Minister of Justice Patrick Chinamasa had called for media reform. -------------- Please Repeal ZDERA -------------- ¶7. (C) Biti made a plea for the U.S. to repeal ZDERA so the U.S. could vote for IMF support for Zimbabwe. He also argued that ZDERA was impeding Zimbabwean banks in their international payments. -------------- Looking Forward to Washington -------------- ¶8. (C) Biti said his agenda in Washington, where he will attend the spring IMF/World Bank meetings, was to meet with high-level officials at the State Department, to request technical assistance, to meet with Paris Club officials, and to ask for consideration of the repeal of ZDERA. -------------- COMMENT -------------- ¶9. (C) There is a pervasive sense of a "Harare Spring," and it is impressive that a long-time skeptic such as Biti is so optimistic. Nevertheless, given the history of Mugabe and ZANU-PF, a note of caution is certainly warranted. We continue to believe that we should look for ways of helping this transitional government without providing sustenance to ZANU-PF. We should also look closely to see if important near-term benchmarks, such as media reform and the beginning of the constitutional process, are attained. END COMMENT. MCGEE