AGAINST the background of an already shrinking economy, banks were shocked last week when the Supreme Court ruled they must pay back clients for the money which Reserve Bank Governor Gideon Gono took from their accounts in 2007.
With the economy then paralysed by land seizures and foreign reserves exhausted, Gono took about $400 million in foreign currency from corporate bank accounts held by private citizens. Gono even raided accounts of non-governmental organisations and some charities and humanitarian trusts.
Banks had no choice but to hand over the money when Gono came knocking on their doors.
The government used some of that money to import essentials, but huge amounts were used to import tractors for the Zanu PF cronies and supporters who benefited from the land reform programme.
Gono also gave politically connected people foreign currency at low rates of exchange when the Zimbabwe dollar became worthless.
Last week China Shougang International went to court to recover nearly $49,000 of its deposit in Standard Chartered Bank. The bank had refused to pay out because it said it had been forced to surrender the money to the RBZ.
George Guvamatanga, president of Bankers' Association of Zimbabwe, said that the Supreme Court order "had created uncertainty" in the banking sector.
Other bankers put it more strongly. "If all our clients ask for their money back based on this ruling we are finished. I expect the larger banks will go to the new Constitutional Court. And so far that court does not fill any of us with confidence."
Economist John Robertson said the judgment against Standard Chartered could prove disastrous: "The Reserve Bank demanded the handover of foreign exchange balances held in foreign currency accounts. The banks did not have any option but to comply.
"The Reserve Bank therefore became fully accountable for the funds. The court judgment was therefore wrong in law as well as in common sense."
He said the implication was that the court received instructions from politicians that the Reserve Bank's impunity should not be compromised.
He said if other depositors also demanded their money back, banks would not be able to take present depositors' money to pay them back. The banks would have to dig into reserves, such as selling off buildings and other assets.
The ruling came when the banks were already suffering their worst liquidity crisis since the days of hyper-inflation of the now defunct Zimbabwe dollar. Several locally owned banks are unable to meet withdrawals, and even some of the larger banks are staggering pay-roll payouts.
Electronic transfers are being held up between indigenous banks, and payday queues at these banks grow ever longer.
Harare city council has been unable to pay September salaries for employees because Local Government Minister Ignatius Chombo wrote off ratepayers' bills ahead of the July elections in a vote-catching gesture.
Reports said 700 companies in Harare alone had closed over the last two years with tens of thousands of job losses. The country is also importing maize from Zambia, but has only paid for a small part of it so far.