Debt Court Ruling; A Win-Lose for Government: CSO

Black Market Caused Inflation: Masimba Holdings
Image Credit: Business Live

A Civil Society Organisation (CSO) that deals with development says the supreme court landmark ruling on United States Dollar debts is a win-lose situation for the government as it is both a creditor and a debtor.

The Supreme Court of Zimbabwe ruled that debts accrued in USD on or before 22 February 2019 must be paid in local currency, Zimbabwe Dollar, at the rate of 1:1.

“On one hand, the government owes domestic creditors US$9 billion which effectively has been converted to ZWL$9 billion at US$1: ZWL$1, Meanwhile the amounts to external creditors retained the same value in US dollars. ” Zimbabwe Coalition on Debt and Development (ZIMCODD) says.

“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.”

The CSO went on to say that the monetary policy developments and the court ruling in particular disadvantages the creditor considering that the two currencies in question do not carry the same purchasing power.

“Simply put, ZWL$1000 is currently equivalent to USD58 at the official exchange rate as of 23 January 2019. Therefore, assigning equal weight to the two currencies for debt repayment does not only kill the financial services sector but also takes away investor confidence across sectors,” the organisation explains.

“The domestic creditors will not be able to recover the principal amount lent, let alone the interest. Therefore, the chances for economic revival in the near future remain slim as the country desperately needs economic bail out from two decades of economic regression.”

Finance Minister Professor Mthuli Ncube, last year floated the local RTGS to trade with other currencies. The local currency has been losing value to the USD since then.

“In any case, the government should have come up with a mid-rate that guarantee debtors’ ability to repay whilst retaining value for money to the creditors,” ZIMCODD says.

Be the first to comment

Leave a Reply

Your email address will not be published.