Zimbabwean banks are set to lose millions after the Supreme Court ruled Tuesday that debts incurred before last February should be settled in the local currency at a rate at par with the greenback.
On February 22, 2019, Zimbabwe’s central bank unveiled a foreign exchange trading system that effectively devalued the local currency which was officially pegged at parity with the US dollar.
The US dollar was worth 16 Zimbabwe dollars, on average, this week.
But in a decision that could see banks and other lenders losing millions, Supreme Court Chief Justice Luke Malaba said that “assets and liabilities, including… debts denominated in United States dollars immediately before the effective date of 22 February 2019” shall be valued in the local currency at a rate of “one-to-one”.
At the start of the century, the southern African country regularly posted fiscal deficits that it financed by printing money.
This led to hyperinflation that wiped out personal savings, left shops empty and made it all but impossible to buy a tank of petrol or daily groceries.
Inflation peaked at 500 billion percent before the national currency was abandoned in 2009 in favour of the US dollar and other foreign currencies.
The move ended inflation and brought stability to the country, but the supply of US dollar notes gradually dried up.
Last year government banned the use of the US dollar and introduced a new Zimbabwe dollar.
The economy entered a new downturn in 2012.
President Emmerson Mnangagwa, who succeeded long-time ruler Robert Mugabe following a brief military takeover in 2017, has struggled to revive the moribund economy. AFP