Zimbabwe created United States dollars through borrowing from the central bank and issuance of Treasury Bills to cover the indebtedness of state-owned entities, Finance minister Mthuli Ncube has said.
Ncube was responding to a court application by Zimbabwean lawyers
through the Law Society of Zimbabwe (LSZ) who had taken the government to task on de-dollarisation citing that the move was inconsistent and culminated in a loss of value among citizens.
LSZ in an application to the High Court in March this year citing Ministry of Finance and Economic Development, Reserve Bank of Zimbabwe (RBZ), the President of Zimbabwe among others as respondents noted that Sections 4 (1)(b) of Presidential Powers (Temporary Measures) (Amendment of the RBZ Act and Issue of Real-Time Gross Settlement (RTGS) dollars, 2019 was inconsistent with Section 71 (2) of the Constitution and invalid in terms
of Section 2 of the Constitution of Zimbabwe.
In his opposing affidavit, Ncube noted that the two currencies which
were both called the USD at a particular time were not the same.
“When I came in as Finance Minister in 2018, I realised that there was
a hard currency in the form of USD which was being deposited by industry
and a created USD in individual bank accounts.
“That was the inflation driver as the large amounts were a created currency denominated in USD. In October 2018 banks were instructed to separate real USD which was being deposited in hard currency and the created USD which was being used as a mode of transaction through plastic and mobile money,” Ncube said.
The latest dispute comes after the Presidential Powers (Temporary Measures) (Amendment of the RBZ Act and Issue of RTGS dollars, 2019 culminated in the introduction of the local currency and eventual scrapping of the multi-currency system.
The lawyers’ representative body in the application cited that the State through the February 2019 amendment to the RBZ Act presided over the compulsory deprivation of LSZ’s rights to USD balances and assets.
“In devaluing the bank balances in the applicant ‘s RTGS FCA accounts
and further compulsory converting USD denominated assets into RTGS
dollar assets, the State presided over the compulsory deprivation of the applicant’s right USD balances and assets affected by RTGS dollar regulations.”
The lawyers further argued that, in terms of Section 71 (3) of the constitution, it is impossible for any person to be compulsorily deprived of his/her property unless the deprivation is in terms of a law of general application.
LSZ said the compulsory conversion of its USD denominated assets and
bank balances done in terms of Statutory Instrument 33 of 2019 did not
serve any public interests.
They further said such deprivation was not accompanied by any payment or tender of compensation to the applicant, the person affected by that deprivation.
The lawyers’ apex body said that it has an interest in the issues concerning the compulsory deprivation of property personally belonging to LSZ.
“The applicant being the largest body representing legal practitioners
in Zimbabwe has an interest because issues raised herein affect its membership daily,” said LSZ.
Ncube said if the applicant had hard currency deposits or donations from
international organisations in United States dollars, which would have been
moved into FCA Nostro accounts which applicant would have opened
according to the directive to banks.
“FCA Nostro balances which were hard United State Dollars deposited in
those accounts were never converted into RTGS dollars.
The RTGS FCA balances were declared to be opening balances of RTGS dollars at 1:1 as at 22 February 2019 and these were not real Unite States Dollars,” Ncube said.
In February 2009, the government introduced the multi-currency system
in terms of which the United States Dollar was accepted as legal tender in
Zimbabwe alongside other currencies.
The introduction of the multi-currency system was regularised and given
legal effect by way of Section 17 of the Finance (Number 2) Act, 2009.
Consequent to the introduction of the USD, Zimbabwean citizens, including LSZ were allowed to open and operate USD accounts for purposes of