Changed Dollar Note Loses Market Value

June 06, 2006

A British citizen, who works from New York, came over here on a working visit sometime ago, she was dumfounded to learn that the front desk at the hotel she stayed in, Meridian Hotel, off Africa Avenue (Bole Road), refused to accept some of the dollars notes she had, while they seemed to not have problems with others.

She was told the ones rejected were issued in 1996, thus no one would take them from her. They were telling her the truth. The US dollar notes issued in 1996 are being rejected in the markets, both in the official and parallel money market.

Beginning in 1996, the Federal Reserve of the United States has been adding advanced security features to its notes, for the reason that advanced copying technologies have helped raise the incidence of counterfeiting, such as ink jet printers, colour copiers, and scanners. But the government has never put the old notes out of circulation, although the Federal Reserve is putting them out of circulation whenever they are netted by the banking system.

They are all together rejected by banks in Ethiopia, with the exception of Wegagen Bank.

Awash International Bank, Commercial Bank of Ethiopia, the Construction and Business Bank, and Dashen Bank are among the ones who are troubled by notes of 1996, according to officers in their foreign exchange departments.

These dollar notes are being rejected in order to avoid counterfeiting, which has been done on most of the dollars printed before 1996, say their officers.

The black market thinks different. Instead of totally rejecting the notes, it tries to manage the risk by discouraging transactions, with lesser offers than those on bills issued since 2000.

“There are not many people coming with these bills,” said a black market dealer on Mahatma Gandhi Street.

The much more recent notes fetched anywhere between 8.90 to 8.93 Br last week. The 1996 notes got 20 cents lower.

“We would know if the dollar bills are forged,” according to this dealer. “But, we reduce the value, both the buying and the selling, as the dollars are unacceptable in the banks.”

The central bank does not seem to bother much with what sort of dollars banks do or do not take.

Every bank has the right to reject any dollar bills, according to Seife Desta, Director in the Banking and Foreign Exchange Directorate of the National Bank of Ethiopia (NBE).

“We can’t interfere in their activities,” he told Fortune, “as they are doing it to reduce the risk of counterfeiting.”

The Bureau of Engraving and Printing (BEP) of the United States issued newly designed currency notes beginning in 1996. The current design effort is a response to the need to anticipate potential problems with counterfeiting and to prevent criminals from abusing United States paper currency.

In keeping with the strategy of maintaining the security of the currency by enhancing the designs every seven to 10 years, a new series of U.S. currency is being issued, beginning with the 20 dollars note which entered circulation on October 9, 2003, followed by the 50 dollar note which was issued on September 28, 2004.

By DERESE NIGATU

FORTUNE STAFF WRITER