Hasnaa Al Rantisy - Palestine Economy Portal

 

The crisis of the surplus currency “shekel” makes a pressure tool that Israel exerts on the Palestinian economy. The issue deepened after the "clearance crisis", when the Palestinian government refused to receive incomplete clearing (tax revenues that Israel collects on behalf of the Authority according to the Oslo Accords), as if the shekel crisis had come In response to the Palestinian position.

The Israeli occupation state deals with the Palestinian banking system as if it is one of the Israeli monetary tools; If Israel wishes to increase its supply of shekels, it allows the Palestinian Authority and the Palestinian banking system to pump liquidity to its markets, while Israel would pose restrictions on the Palestinian banks when it wants to rein in. as explained by the economist and head of the economics department at An-Najah University Bakr Shtayyeh.

Shtayyeh says, in the Palestinian case, as part of the Paris agreement, the shekel currency is the daily circulation currency, the monetary relations with the occupation is in shekel, the Palestinian markets have a flow in shekel greater than the ability of the Palestinian banking system to absorb and dispose locally.

 

Source of the surplus

On the source of the surplus shekel, Shtayyeh says that Palestinian workers inside Israel transfer a minimum of 12 billion shekels annually to the Palestinian markets, which, in turn, flow into banks.

In addition, the purchases of the Palestinians are estimated at 3 billion shekels annually. In addition to that, clearing flows with the Israeli side and direct commercial relations with Israeli merchants, all of these create a cash block exceeding 20 billion shekels annually.

 

The "surplus" is a restriction based on the Paris Agreement

We have been restricted by the Paris Agreement, Shtayyeh says, adding “we are restricted by the Paris Agreement, meaning that there are no internal and external financial transfers except through the Israeli banking system, as a control system over the Palestinian Authority and the banking system.”

Shtayyeh believes that the Israeli side reached that decision as a response to the Palestinian side after the clearance crisis, with the aim of harming the Palestinian economy, which creates the need for some kind of monetary coordination with the Israeli side.

 

Surplus has "costs" and a negative impact

 

Shtayyeh points out that the money kept inside Palestinian banks when there is an excess of liquidity in the shekel currency has a cost to preserve and secure it and solve the problem of damaged ones, which is a direct cost.

The surplus has a significant impact on Palestinian banks, as banks pay bank credits to merchants when importing from abroad, as Shtayyeh explains. The merchant has a balance in a bank, and when he deals with a Chinese merchant, for example, the bank transfers money to him.

The problem is that these banks, due to the accumulation of shekels, and their inability to transfer the surplus to the Israeli side, their accounts have become exposed to these deals, and therefore these Palestinian banks are forced to borrow from Israeli banks to pay these payments to Palestinian merchants at a very high interest rate, with shekels piled up with the banks. Liquidity is available, but there is no possibility of transferring it to the Israeli side to transfer it back to the approved, and this is a cost to the Palestinian banking system.

Hence, we find that some Palestinian banks impose a ceiling on bank deposits in the shekel due to their unwillingness to accumulate the shekel, far from the existence or non-existence of legal problems for this act.

Gas stations also have an excess of the shekel currency and have to bear the risk of holding cash through non-banking instruments.

 

Monetary Authority: “Surplus transfer has resumed”

 

"The transfer of the surplus shekels has been resumed," says Muhammad Manasra, Director of the Supervision and Inspection Department at the Palestinian Monetary Authority, noting that as of Sunday, the Palestinian side will have shipped 700 million shekels as a weekly payment, and said that the suspension of payments came because Jewish holidays.

Shtayyeh says that the Monetary Authority’s statements say that there is no crisis, and the banking sector deals with the issue periodically.

 

A lack of a quick solution.

Shtayyeh beleives that the conversation about solutions to this problem has many caveats, among the solutions; to reach understandings with the Israeli side on this issue, but the caveats here relate to the Authority’s unwillingness to coordinate with the Israeli side, even though we are dealing with the Israeli side as a banking system within old agreements.

It is now difficult to ask the Palestinian government to sit down with the Israeli side to raise the ceiling of transfers In shekels, the Israeli side has from 4 billion shekels every 3 months to 6, for example, to get rid of the surplus. "I doubt the Israeli side will agree, because that will affect the strength of the shekel as a currency and weaken it, and Israel is not currently willing to weaken the shekel in such a way."