INDEPENDENT NEWS

Cablegate: Scapegoating of Reserve Bank Intensifies

Published: Thu 21 Aug 2003 02:44 PM
This record is a partial extract of the original cable. The full text of the original cable is not available.
211444Z Aug 03
UNCLAS HARARE 001655
SIPDIS
STATE FOR AF/S
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
TREASURY FOR OREN WYCHE-SHAW
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON
E. O. 12958: N/A
TAGS: ECON EINV PGOV ZI
SUBJECT: Scapegoating of Reserve Bank Intensifies
1. Summary: Although the Government's daily Herald has
cast blame in many corners for the country's cash
shortage, its recent attacks on the Reserve Bank (RBZ)
have been frenzied and unrelenting. This makes little
sense, but then in today's Zimbabwe, what does? End
Summary.
Latest Villain?
---------------
2. At times, the Herald has fingered private banks, cross-
border traders, the opposition party and Asian merchants.
However, the newspaper's denunciations of the Reserve
Bank have now reached fever-pitch. Wednesday's Herald
began with the article, "RBZ bosses told to quit,"
carrying charges from various ruling ZANU-PF legislators.
Only due to RBZ's asset mismanagement, the article
charged, does Zimbabwe have a forex shortage. A follow-
up editorial in Thursday's Herald called again for top
RBZ managers to resign. It complained: " . . .
authorities at the central bank just watch with folded
arms as if everything is normal . . . Indeed, it seems we
have a bunch of myopic top RBZ management, which has
failed to keep pace with the ever-changing domestic and
international markets. . . We expect the current senior
management to do the honorable thing of quitting."
Comment
-------
3. By any measure, the Herald's RBZ bashing is bizarre.
Neither the Herald nor the RBZ enjoys a modicum of
autonomy from President Mugabe and his inner-circle. The
Herald is no more an independent newspaper than RBZ is an
independent central bank.
4. While it is conceivable there is genuine policy rift
within the GOZ, this is hard to fathom. The RBZ so
loyally toes the GOZ line that we cannot remember a
central bank governor or other high official disagreeing
publicly with government policy or pronouncements. (The
RBZ has not defended itself against recent allegations.)
There are several reason why the RBZ printed too few
banknotes: a) Contrary to common economic sense, the RBZ
based inflation projections on the GOZ's insistence last
November that 2003 inflation would run 96 percent (it's
currently 400 percent); b) Each Z$500 (US$.10) banknote,
the highest denomination, costs many times more to print
than it is worth. The Reserve Bank lacks resources to
play this game forever; c) Finally, the RBZ is unable to
print larger denominations - the obvious solution -
because the GOZ refuses to accept its currency's broad
devaluation, a consequence of failed economic policies.
If anything, the RBZ's blind adherence to dotty GOZ
policies caused Zimbabwe's cash crisis.
Sullivan
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