Palestine Monetary Authority’s Governor: Palestine Monetary Authority Holds Discussions and Consultations to Reduce the Use of Banknotes in Local Markets

September 23, 2021

The Governor of Palestine Monetary Authority, Dr. Feras Milhem, announced that the ceilings placed by the Israeli side on the shipments of surplus shekels prevented the freedom to ship shekels to Israeli banks and led to preventing Palestinian banks from receiving cash deposits from clients.

Dr. Milhem pointed out that Palestine Monetary Authority was holding discussions and consultations with all parties in the local market as well as with the Israeli side to find long-term solutions to the issue of the flow and accumulation of shekels in the markets. The consultations included taking serious action in the short and medium term to reduce the use of cash in the domestic market and to rely on financial technology in the implementation of trade, domestic and cross-border payments.

With regard to shekels’ shipments, Dr. Milhem explained that as a result of the recent efforts led by Palestine Monetary Authority in cooperation with the General Authority for Civil Affairs, from the beginning of next week, shipments would resume, noting that the banks would be ready to receive new deposits from clients at the same time.

This came during Dr. Milhem’s speech at a meeting held today at the headquarters of the Chamber of Commerce and Industry of Ramallah and Al-Bireh Governorate, about the problem of excess cash of the shekel currency in Palestinian banks, in the presence of the President of the Chamber of Commerce Mr. Abdul Ghani Atari, Deputy Governor of Palestine Monetary Authority Mr. Mohammed Manasrah, and managers and representatives of Palestinian banks, lending institutions, companies and businessmen.

The Governor of Palestine Monetary Authority explained that there were discussions taking place with the Israeli side to increase the ceiling of the transfer of surplus shekels, to cancel such ceiling, in addition to discussing ways and procedures to activate electronic mechanisms to pay the prices of goods and services and transfer workers' salaries directly to Palestinian banks.

Dr. Milhem pointed out that the accumulation of shekels was an obstacle for banks to feed their accounts with Israeli banks and complete many commercial transactions, pointing out that one of the most important reasons for the accumulation of shekels was the wages paid to workers in Israel officially and unofficially, which was estimated at about 1.3 billion shekels per month, which were not charged through banks, and that work would be done to address this in cooperation with both the Government, the Ministry of Civil Affairs, the Ministry of Labor and the Ministry of Finance.

Dr. Milhem added that there were other sources of shekel accumulation, including the import and export process with the Israeli side, as well as liquidity from the Palestinians living in 1948 areas who were unable to use electronic payment methods during their purchase from Palestinian markets.

Dr. Milhem stressed that Palestine Monetary Authority was working to find fundamental and strategic solutions to the problem of the accumulation of excess shekels in Palestinian banks, most notably the completion of the infrastructure of electronic payment services. Dr. Milhem pointed out that Palestine Monetary Authority had recently worked on the licensing of 5 electronic payment companies that allow citizens to complete financial transactions electronically without the use of cash, and that during the next 3 to 6 months the national switch system would be completed to settle points of sale, which would reduce the cost to traders who use electronic points of sale to less than 1% and increase the effectiveness of this service.

Dr. Milhem explained that, through a joint project with the Islamic Development Bank, a study was underway to issue a digital and accounting currency for the purposes of paying fees and taxes instead of paying them in the three currencies including shekels, dinars and dollars. And that cooperation was underway with the Palestinian Government to enable it to complete the infrastructure of the electronic payment project. Dr. Milhem stressed the need to join efforts between Palestine Monetary Authority, banks, chambers of commerce, businessmen and public and private sector institutions to change the culture of electronic payment in Palestine and encourage citizens to use it.

The President of the Chamber of Commerce and Industry of Ramallah and al-Bireh Governorate Mr. Abdul Ghani Atari pointed to the burden left by the problem of accumulating excess shekel liquidity on banks, traders, businessmen, importers and large companies, stressing the need to join the efforts of the institutions combined, led by Palestine Monetary Authority, to find a fundamental solution to this problem to protect the national economy.

Participants in the meeting briefed Dr. Milhem about the problems they faced as a result of the problem of the accumulation of excess shekels, the negative impact of such problems on their businesses, and their proposals to solve the problem.