Local debts accrued in United States dollars before the floating of the RTGS dollar on the 22nd of February 2019 will be settled in the local currency using the one as to one rate which existed then, the Supreme Court ruled this morning.
On the 22nd of February 2019, the Reserve Bank of Zimbabwe (RBZ) floated the RTGS dollar under the Statutory Instrument 33 of 2019 at a rate of 1 USD is equivalent to RTGS$ 2.5, bringing to an end the parity of the two currencies.
The development has created complexities in settlement of debts dated prior to the Statutory Instrument.
In a latest dispute, Chief Justice Luke Malaba made the judgement in an appeal case against a High Court judgement by Zambezi Gas Zimbabwe.
V.B.R(first respondent) Barber offered services to Zambezi Gas Zimbabwe services in May 2018 to the tune of US$3 885 000.00.
However in May 2019 after the promulgation of S.I 33 of 2019, Zambezi Gas, following a high court order went on to pay the first respondent RTGS$ 4 136 806.54. This entailed the debt and interest.
V.B.N Barber however felt short-changed following the loss in real value terms of the payment and made an application that it was still owed US$ 3 992 018.31 arguing the amount paid was equivalent to US$144 778.23 as per the payment date’s interbank rate.
V.B.R Barber therefore instructed the Sheriff, cited as the second respondent, to attach Zambezi properties in Hwange to settle the outstanding debt of US$3 992 018.31.
But Chief Justice Luke Malaba in his judgement ruled that the debt be paid in the local currency using the one is to one rate between the RTGS dollar and the USD.
“The High Court further erred in failing to find that the US dollar debt was capable of being discharged at a rate of one US dollar to One Rtgs dollar as specified in Section 4(1)(d) of SI 33/19 and therefore failing to find that the appellant fully discharged the debt on 21 May 2019,”
“The payment of Rtgs$ 4 136 806.54 made by the appellant was in full and final settlement of the debt in terms of Section 4(1) (d) of the Statutory Instrument 33 of 2019,” Malaba ruled.
The judgment has however been met with mixed feelings but some experts have hasten to say that local banks who had issued long-term loans in real American dollars will be the biggest losers.
Economic analyst, Victor Bhoroma said some sections of the economy will benefit from the judgment as it will ease the debt burden.
“The judgement has got negatives and positives because remember any producer in the economy is a supplier or is a debtor. In a nutshell, the judgement means that any company that lent money in real American dollars has lost out. For example if a bank gave a loan to an entity be it a manufacturer in real USD it simply means that they are now going to receive a figure which is 17.15 less (current interbank rate),”
“It’s a significant loss if you look at a balance sheet of what you could have loaned out. Most companies with debts in USD have however benefitted from this judgement. But the major benefactors are those who had mortgages from banks and the Zimbabwean population in general who had debts in USD now can pay in local currency and not forgetting Government itself which is the biggest consumer of services and will benefit a lot,” Bhoroma said.
Analysts have also warned of a major loss in real value terms for most companies with USD debtors.
