No Prospects for Palestinian Currency
With Israeli maintaining control of the Palestinian economy and internal divisions stalling reconciliation, a Palestinian currency seems little more than a dream, writes Omar Shaban.
Reinstating the Palestine pound has long been a dream for Palestinians. Nevertheless, amid the Palestinians’ eagerness to consolidate their sovereignty and in view of the reality of the Palestinian economy that is controlled by Israel, not to mention the losses and challenges that could result from such a step, it seems that this Palestinian dream still has a long way to go before becoming a reality.
During the era of the Ottoman Empire, the Ottoman lira was the currency circulated in Palestine. With the beginning of the British Mandate, the pound sterling was introduced and was linked to the Egyptian pound. In the late 1940s, the government of the British Mandate decided that the time had come to issue a Palestinian currency. This decision, however, was strongly rejected by Palestinian civil organizations — such as the Christian-Muslim association in Haifa, the chambers of commerce and national forces. They were opposed to this step on the basis that the Palestinian government was not independent, as it operated under the control of the British High Commissioner.
The civil forces warned that issuing a Palestinian currency without being backed by a sufficient amount of gold would hold off investors and undermine Palestinian exports — most importantly agricultural exports — at the time. Nevertheless, the High Commissioner insisted on issuing a Palestinian currency to be linked to the pound for which purpose he formed the Palestinian Monetary Council. The Palestinian pound was introduced equal to the pound sterling.
When Israel occupied the rest of the Palestinian territories in 1967, it closed all Palestinian and Arab banks, imposing its own currency — the Israeli lira, and then the Israeli shekel. This had caused the Palestinian economy to deteriorate, paving the way for the Israeli economy to grow at very high rates. In 1993, the Palestinian Liberation Organization (PLO) signed a peace agreement with the Israeli government, which resulted in new monetary and financial arrangements.
