[Economics] Excess Israeli currency is a threat to the Palestinian economy

[#Wittels-]

The excess of money in Israeli currency in Palestinian businesses may not be the most talked about aspect of the occupation, but experts warn that it is a growing concern for the Palestinian economy.

Palestinians in the West Bank use the Israeli shekel, but even with that factor in common, the two financial systems are drastically different.

In Israel, as in many advanced economies, digital payments are growing rapidly, replacing transactions with banknotes and coins.

But in the West Bank, under Israeli military occupation since 1967, cash rules.

Tasir Freij, owner of a hardware store in Ramallah, told AFP that he must pay a 2% commission to deposit cash because his bank is reluctant to accept it.

"It is a crisis ... and we are feeling its effects," Freij said.

Much of the paper money is brought in by tens of thousands of Palestinians who work in Israel or the Jewish settlements in the West Bank, and receive their wages in cash.

Experts and traders fear that the accumulation of the paper currency threatens to suffocate the Palestinian financial system.

 

 

Freij said buying goods from abroad typically requires converting the shekel into dollars or euros, but the abundance of Israeli currency on the market forces him to accept an unfavorable rate.

- Dump -

The Palestinian Monetary Authority (PMA), which functions as the central bank in the West Bank, has warned that paper shells are piling up because there is no way to return them to Israel.

The governor of the AMP, Firas Melhem, told AFP that the accumulation of money is "a very worrying problem", causing headaches for banks and businesses.

"If the problem is not resolved quickly, the Palestinian market will become a dump for shekel," he added.

The shekel was established as the official currency of the Palestinian territories as a result of the economic protocols known as the "Paris accords", reached after the Oslo Accords between Israel and the Palestinians in 1994.

But a lot has changed since then.

 

 

By using more and more digital transactions, Israeli banks do not want to reabsorb the paper money that accumulates in the West Bank but does not circulate rapidly in the Israeli economy.

The Bank of Israel cited security as another reason for not wanting the banknotes.

"Uncontrolled cash transfers could be misused, especially in money laundering and terrorist financing, and would not be in line with international parameters," the bank said in a statement sent to AFP.

- Solutions? -

Palestinian banks have tried to get clients to reduce their cash deposits, but that runs the risk of limiting the capital available to banks, which would reduce their ability to offer loans.

The excess liquidity prompted calls from some Palestinian specialists to discard the shekel to adopt a Palestinian currency or that of another nation, such as the Jordanian dinar, which also circulates in the West Bank.

 

Meanwhile, the AMP is putting pressure on the Bank of Israel to accept more cash.

But Melhem insisted that the Palestinians must also "catch up with the development of financial technologies" and move to cashless payment systems.

 

Link: https://www.france24.com/es/minuto-a-minuto/20211017-exceso-de-moneda-israelí-es-una-amenaza-para-la-economía-palestina