A senior figure in Fiji's interim regime, Reserve Bank Governor Sada Reddy, is believed to be in New Zealand qualifying for a permanent residency visa that will allow him to come and go at will, despite travel sanctions.
Foreign Affairs Minister Murray McCully said he was "not comfortable" with the apparent inconsistency but the Government was powerless to stop it, partly because its laws were weaker than those of Australia.
Mr McCully said Australia's law allowed residency to be revoked if a person's actions were contrary to foreign policy interests. New Zealand had no such provision.
"We have, to the best of my knowledge, no steps open to us.
"Under our rules, which are more generous than Australia's, those who have residence can come and go.
"I do not feel comfortable about the fact that people who would otherwise be subject to the sanctions are able to be treated in this way when others would be banned from New Zealand, but that's how our rules work."
It opened the Government to claims it was being inconsistent with its sanctions on Fiji, especially in light of Australia's stronger laws.
Mr McCully said there were others in the regime with residency. It made the sanctions "somewhat unfair" because those without residency were banned while others could come and go without restriction.
Mr Reddy is a senior figure in the interim regime and was appointed Reserve Bank Governor after his predecessor, Savenuca Narube, was removed from office following the abrogation of the constitution in mid-April. Mr Reddy was Deputy Reserve Bank Governor for 14 years.
Fiji blogs reported Mr Reddy was in New Zealand to get permanent residency - understood to be a returning resident's visa that will allow him to come and go at will. He was already a resident so could not be stopped from entering. Mr McCully confirmed he had been told Mr Reddy had entered New Zealand "and to the best of my knowledge is still here".
He said he had heard "rumours" consistent with what the blogs reported and, if so, the immigration rules left the Government "with nowhere to go".
"He would be entitled to a returning resident's visa provided he fulfilled the requirements and there would be nothing the Government could do to stop that, short of changing the law. While that might sound attractive to some, it does bring you into a very difficult area of debate."
A staff member at the Reserve Bank in Fiji said Mr Reddy was in Fiji and requested questions be emailed. No reply was received by last night.
Mr McCully said it was "open to debate" whether the rules should be changed.
"We've tried throughout this difficulty with Fiji to avoid taking any steps that would give people the impression that we were no better than they are. And so we wouldn't lightly change the law relating to residence status just to target the people who would otherwise be banned. We've thought about it and had a look at what would be required, but it's not our intention at the moment to advance any such proposal."
Others closely involved with the regime have also been in New Zealand because they have citizenship or residency. John Samy, a New Zealand citizen, and Jone Dakuvula, both of whom were closely involved in working on electoral reform in Fiji and supported the regime, spoke at a conference in Wellington last month.
Since the December 2006 coup, New Zealand has had restrictions on Fiji's interim Government and its military.
They included travel bans, a reduction in sporting contacts and halt to ministerial-level contact. Fiji has also been suspended from the Pacific Islands Forum.
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