RAMALLAH, April 19 (JMCC) - Palestinians have no official currency. They rely on the new Israeli shekel for their daily needs, augmenting it with the US dollar, Jordanian dinar, and the Euro.
Creation of a domestic currency is sure to run afoul of numerous obstacles --nevertheless, the Palestinian Monetary Authority recently announced plans to issue its own coin.
Head of the Palestinian Monetary Authority, Jihad al-Wazir, says that the creation of a Palestinian currency first requires Palestinian control over crossings and guaranteed freedom of movement.
Nearly 600 Israeli checkpoints and barriers block roadways in the West Bank, and Israel
currently controls all entry points into the occupied Palestinian territories
Then the move requires a presidential order and the blessings of the Palestinian parliament. Unfortunately, the parliament hasn’t met for years, its ranks divided in the bitter dispute between the Palestinian factions Hamas
Finally, the currency would be inaugurated alongside the founding of a central bank that is independently managed and financed and capable of producing a “Palestinian pound.”
The last time Palestinians used their own currency was before the creation of Israel in 1948. After the war in which Jordan and Egypt captured parts of Mandate Palestine, currency use was divided between the Jordanian dinar in the West Bank, and the Egyptian pound in Gaza.
After Israel occupied the West Bank and Gaza Strip in 1967, the Israeli shekel entered the basket of Palestinian currencies, and the Palestinian pound became a decorative plaque in many Palestinian homes.
Production of a Palestinian currency is an ambitious project, but one that would benefit the Palestinian economy
by reducing the need for expensive bank commissions, says analyst Nasser Abdel-Kareem.
He believes that the creation of a national currency would require Israeli approval, however.
According to the Paris accords of 1995, Palestinians should gain Israeli approval in order to issue their own currency, particularly because this decision will affect the Israeli economy.
He says that halting the use of the shekel in the West Bank and Gaza would result in a surplus of currency in Israel. Thus, it will damage the economy, which is why [Israel] won't easily agree to this Palestinian decision, says Abdel-Kareem.
He adds that there are other technical aspects to issuing a currency, such as printing, distributing, agreeing on an emblem and the ability to protect it from forgery.
In addition, the creation of a Palestinian currency requires a strong, stable and developed Palestinian economy able to support the currency, he says.
To own a currency, one should have the ability to export, robust investment in the country, have poverty under control, and restrict unemployment and the budget deficit to guarantee a demand for the currency, he explains.
While the Palestinian economy showed some growth last year, the World Bank and other institutions have charged Israeli restrictions on movement with preventing economic expansion and investor stability.
Finally, Abdel-Kareem says the success of a new Palestinian currency will depend upon the transformation of the current Palestine Monetary Authority into a central bank that has the power to issue a currency.”
All in all, the obstacles before the Palestinian pound are many and authorities say they have just begun the process of planning for this dramatic new step.
The shekel, dinar and dollar are the transactions and savings currencies of most Palestinians. Use of the Euro is limited to paying salaries of some Palestinians who work with European Union organizations and companies, as well as some commercial deals.