Cablegate: Zimbabwe's Balance of Payments' Outlook Is

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 HARARE 000942

SIPDIS

SENSITIVE

STATE FOR AF/S, AF/EX, HR/OE
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
LONDON FOR CGURNEY
PARIS FOR BISA WILLIAMS
NAIROBI FOR PFLAUMER
PASS USTR - ROSA WHITAKER
RIO FOR WEISSMAN
TREASURY FOR ED BARBER AND C WILKINSON

E.O. 12958: DECL: N/A
TAGS: ECON EFIN EAGR ETRD ZI
SUBJECT: ZIMBABWE'S BALANCE OF PAYMENTS' OUTLOOK IS
GRIM

SENSITIVE BUT UNCLASSIFIED, PLEASE PROTECT ACCORDINGLY.
NOT FOR INTERNET POSTING.

1. (SBU) A shrinking economy (GDP has declined by
about 25 percent since 1998), land resettlement, high
inflation, an artificially pegged currency and weak
mineral prices have combined recently to cause
Zimbabwe's exports to contract sharply, with the 2001
total down about 30 percent from their peak in 1997.
With export earnings down so steeply and economic
conditions so bad, the current food shortage could
probably not have come at a worse time. There are
simply no Zimdollars in the budget, nor forex in the
central bank, to buy food, the country's offshore
credit standing is non-existent, the development aid
tap is turned off, and its external arrears currently
exceed US $1.3 billion. The chart below provides gross
trade data for last year and our best projections on
trade flows for 2002.

Top Export Categories (US$ millions)

2001 Earnings 2002(Estimate)

Tobacco $643 (see note) $465
Manuf'd Exports $534.7 $420
Gold $166 $140
Other Mineral $174 $150
Horticulture $68 $52
Other Agricultural $62 $50
Tourism/Hunting $28 $18

Gross Exports $1,748 $1,034

For.Dir. Investment $5.4 $0 (negative?)

Note: (Previous Tobacco Earnings: 2000-$400.4, 1999-
$334.5)

Top Import Categories (US$ millions)

2001 Outlay 2002(Estimate)

Manufactured Goods $1,495 $1,125
Fuel $300 $240
Chemicals $130 $100
Electricity $90 $75
Food $45 $450
Debt Service (est'd)$200 $200

Gross Imports $2260 $2,190

Gross Trade
Surplus/(Deficit) ($507) ($1,156)

2. (SBU) The data, which is admittedly very rough and
should be viewed as indicative, shows a gross shortfall
last year of about US half a billion dollars, and an
estimated shortfall in 2002 of about $1.2 billion.
(The foreign arrears account provides a quick proxy
check on these calculations; at year-end 2000 it was
about US $800 million, and at year-end 2001 it was
about $1.3 billion, an increase of $500 million.) The
very large balance-of-payments shortfall means that
Zimbabwe has absolutely no chance of paying for
necessary food imports, unless it strips the hard
currency out of the economy, which will further damage
it and accelerate the decline of GDP.

3. (SBU) Comment: This very basic analysis shows that
Zimbabwe's economic woes are set to worsen, likely
drastically and quickly. Under a worst case scenario
and if current trends are not reversed, in the span of
five years starting at the end of 1998 the ZANU-PF
leadership may very well succeed in halving Zimbabwe's
GDP, dropping per capita income from the US $400 range
to the $200 range. This would place Zimbabwe on par
with the likes of Laos, Togo, Bangladesh and Senegal.
Whites in Zimbabwe constitute about 0.6 percent of the
population, and about a third of those are commercial
farmers. Claiming that he is correcting injustices of
race and land, Mugabe appears willing to inflict
astounding damage on his black countrymen and their
economic inheritance for his own self-interest. This
is the unfortunate stuff of legend. End Comment.

WHITEHEAD

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