Kovedzayi Takawira (Correspondent).
Last week the Supreme Court of Zimbabwe made a landmark ruling that all debts accrued in United States Dollar on or before the 22nd of February 2019 must be paid in local currency at the rate of 1:1
The ruling raised mixed feelings amongst citizens as it created a conflict of interest between debtors and creditors and also endangering people’s savings and pensions.
The ruling only reaffirmed the provisions of SI33 of 2019 in which “all assets and liabilities that were, immediately before the effective date, valued and expressed in United States Dollar shall on and after the effective date be deemed to be values in RTGS dollars at a rate of one-to-one to the United States dollar.
Giving a ruling in favor of Zambezi Gas (Pvt)Ltd in a matter involving NR Barber (Pvt) Ltd, Chief Justice Luke Malaba unpacked the controversial “on or after ” phrase of the provision.
“The values referred to in s 4(1) (d) of SI 33/19 show that after a one-to-one conversion the RTGS dollar takes the value and character of the United States dollar.
“The effect of the phrase ‘on and after’ is that the conversion of all ‘assets and liabilities’ which were valued and expressed in United States dollars immediately before the effective date to values in RTGS dollars at a rate of one United States dollar to one RTGS dollar would apply at the time the value of the asset or liability is liquidated or discharged,” he said.
Zimbabwe Coalition on Debt and Development (ZIMCODD) released a press statement expressing the view that the judgment was a threat to treasury bills despite that this was an opportunity for the government to settle its own debts.
“It is a win-lose situation for the government as it is both a creditor and a debtor. As it stands they owe domestic creditors USD$9 billion which effectively has been converted to ZWL$9 billion at a US$1: ZWL$1. Meanwhile, the amounts to external creditors retained the same value in US dollars”
However, the inconsistent treatment of domestic and external creditors undermines the capacity of domestic creditors from expanding credit extensions in the future. This creates a threat to the certainty of return on investment in the case of treasury bills.
“By and large the government’s decision can be viewed as a deliberate attempt to offset outstanding debts owed to domestic creditors, the monies owed to local lenders. However, the government has taken forever to repay domestic debt, 12 months after a decision was made” reads the press release.
Harare East Member of Parliament and Public Accounts Committee Chairperson Tendai Biti castigated the judgment saying that it was unconstitutional and expects the case to be taken to the constitutional court.
“SI33 and SI4.2 are clearly unconstitutional, you can’t wake up one morning and say your money is no longer money but mangoes it doesn’t work, last week’s judgment was unconstitutional but just an interpretation of the law as it is”
“The government in 2016 on its own introduced the multiple currencies and told everyone that the USD was equal to the bond note. It’s unfair and unjustified for them to just wake up shifting posts saying we were lying to you the two are not equal. It is an uncouth and unconstitutional judgment. It’s still to my surprise up to date why no one has taken the matter to the unconstitutional” he added.
The bond note was introduced in 2016 with the assurance that it was equal to the USD but the Government, later on, ditched its decision introducing the interbank rates which are currently at USD$1: ZWL$17.70, while on the parallel market the bond note continues to be eroded as it now stands USD$1: ZWL$24.