The Majlis Archive

Finance - Banking - Business The Majlis Vol 21 No 08, p.2

A loan of 106,000 kwacha was given to someone.

Question

A loan of 106,000 kwacha was given to someone. Sometime thereafter the government devalued the currency by 50%. How many kwachas should the debtor repay? Also, what is the ruling if the currency is completely phased out?

Answer

When a currency is devalued by the government, then a debt which had been incurred prior to the devaluation should be repaid by adding the amount lost as a consequence of devaluation. Example: Prior to devaluation the debt was K106,000. The currency is devalued by 50% as mentioned in your example. The amount which the debtor has to pay after devaluation is K159,000 (K106,000 + K53,000).

If the currency is completely abolished/discontinued, then the debtor has to pay the amount of gold or silver which K106,000 could have bought prior to the discontinuation of the currency.

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The Majlis Vol 21 No 08
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