Harare – The Supreme Court of Zimbabwe delivered a landmark ruling on Tuesday declaring that a debt owed in United States dollars incurred on or before February 22, 2019 should be settled by paying in local currency, the Zimdollar at the rate of 1:1. The ruling was premised on Statutory Instrument 33 of 2019 which led to the abandonment of a fixed exchange rate between the local currency and the United States dollar.
At the institution of SI 33 of 2019, local financial institutions and corporations adhered to its terms and conditions, save for most property developers and a few creditors who converted debtors’ obligations to local currency using the interbank rate.
In a legal case between Zambezi Gas and NR Barber involving a debt of over US$3 885 0000 owed to NR Barber, Chief Justice Malaba said the Presidential Powers expressly provides that assets and liabilities, including judgement debts, denominated in United States dollars immediately before the effective date of February 22, 2019 shall on or after the aforementioned date be valued in RTGS dollars on a one to one rate. Malaba further said nostro accounts would not be affected.
Today, Zimbabwe’s local currency, the RTGS dollar, is officially trading against the United States dollar at a rate of 1 US dollar to 18 RTGS dollars, with the black market adding a 37% premium to the United States dollar against the local currency.
The not-so-new Supreme Court ruling has generated mixed feelings across Zimbabwe as debtors and defaulters celebrate at the expense of creditors who feel financially prejudiced by this judgement. Before the enactment of SI 33 of 2019, the Zimbabwe government owed local institutions a combined US$9 billion, with local authorities owing employees millions in unpaid salaries.
For highly indebted institutions such as Zimbabwe Football Association (ZIFA), the ruling, which supersedes a high court judgement that compelled debtors to settle their pre- February 22,2019 United States dollar obligations using the prevailing interbank exchange rate is a sigh of relief.
Before SI 33 of 2019, ZIFA owed creditors close to US$10 million. For some institutions, the judgement is indifferent as they had debts, as well as creditors to service. Ian, a foreign investor who invested hard currency in Zimbabwe before February 22, 2019 had a different story to tell. “I wrote off my Zimbabwe investment in February 2019 after the promulgation of SI 33 of 2019”, Ian said. Asked if he would invest again in Zimbabwe, Ian responded, “Your thoughts are as good as my answer”.
Private property developers have cried foul over the ruling, alleging that they accessed foreign lines of credit to develop their properties for resale, and are now compelled to settle their foreign obligations in hard currency, whilst collecting payments form benefactors in local currency at an exchange rate of 1:1.