A High Court in Zimbabwe has set aside a central bank exchange control directive which had unilaterally ordered conversion of US dollar bank account balances into Zimbabwe dollar balances at a fraction of their original value.
At the time, the directive destroyed billions of dollars in savings and wreaked havoc on pension funds.
In 2018, through Exchange Control Directive No. R120/2018, the Reserve Bank of Zimbabwe directed that all bank deposits made prior to October 2018 be converted from then-existing United States Dollar balances into Zimbabwe dollar balances, provided they were not deposited from offshore sources.
Zimbabwe was, prior to October 2018, using a pegged exchange rate of 1:1 between the US dollar and the local Zimbabwe dollar, then known as the bond note.
The directive left individual and corporate depositors smarting from exorbitant exchange losses.
Banks, on the other hand, benefited, as they had to pay out much less than had been deposited after the local currency had significantly lost its value.
Just before the October 2018 effective date, banks held deposits of approximately US$9 billion.
‘Offensive to any sense of justice’
The case saw applicants Penelope Douglas Stone and Richard Stuart Beattie suing a local bank for disabling any withdrawal of United States dollars from an account which had held a balance of US$142 000 before the exchange control directive.
They took their bank, Old Mutual-owned Central African Building Society (CABS) to court, seeking to have the value of their savings repaid. The second and third respondents were the Reserve Bank of Zimbabwe and the Minister of Finance respectively.
Judge Happious Zhou of the Harare High Court on Thursday ruled in a scathing judgment that equality of value could not be arbitrarily or capriciously imposed.
“It is offensive to any sense of justice that a person who holds money in a bank can wake up on any day to be told that his money means something else different from what it has always been,” reads part of the judgment.
Zhou noted that the applicant’s money was now likely worth less than 4% of its value at prevailing official rates, “which this court cannot ignore”.
This could not be defended in a democratic society, he added, and declared the directive null and void, saying the decision was not only arbitrary and irrational, but failed the test of being reasonable.
The judgement went on to describe the exchange control directive as illegal, unconstitutional and consequently invalid.
The court ordered CABS to pay the applicant US$142 000 with interest, or transfer it into an account nominated by the applicants within seven days.