Friday, August 04, 2006

Monetary enforcement under fire

Police and Reserve Bank officials came under fire Thursday for what critics said were indiscriminate searches of citizens and seizures of large amounts of currency deemed excessive in the three-week runup to a late-August deadline for the exchange of old banknotes for new bills intended to simplify life amidst 1,200% inflation.

Consumers reported losing large amounts of cash at police roadblocks nationwide as they tried to reach banks to deposit expiring banknotes or swap them for the new bills that the central bank started issuing Tuesday. Central bank officials were present at some but not all roadblocks, local police spontaneously threw up many others.

Human rights defenders and other legal experts criticized the indiscriminate search of travelers on the borders and inside the country in search of black market gains. The central bank and government launched the campaign in an attempt to confiscate much of the trillions of dollars circulating in domestic and foreign parallel markets.

Within the financial system, bank automatic tellers remained out of service as financial players struggled to overhaul systems to cope with new denominations - for instance, the old Z$100,000 note is being replaced by a new Z$100 note which at the post-devaluation exchange rate of Z$250 to the U.S. dollar is worth 40 U.S. cents.

The central bank lopped three zeroes from the old currency one day before releasing a new set of banknotes aimed at offsetting some of the effects of 1,200% inflation, in particular the need to carry around wads of currency for routine transactions.

Police and ruling party youth militia members searched travelers and seized currency in excess Z$100 million (old notes) for individuals, $400 at the new exchange rate.

Reliable sources said there were 10 roadblocks on the highway between the Zambian border to the north and Karoi, 150 kilometers towards the capital, Harare.

Legal experts questioned the way financial authorities sought to enforce recently-set limits on the amount of cash individuals or businesses can legally hold.

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