9/22/2024–|Last update: 9/22/202404:58 PM (Makkah Time)
Israeli Prime Minister Benjamin Netanyahu called on Finance Minister Bezalel Smotrich, Bank of Israel Governor Amir Yaron, and the heads of the Tax Authority and the Arab Community Crime Prevention Authority to hold a discussion session on canceling the 200-shekel note, which puts billions of shekels in the Palestinian territories at risk due to the intransigence of Israeli banks in accepting shekels from banks operating there.
Black money
The move would help combat black money, and according to its supporters, would add more than 20 billion shekels ($5.28 billion) to Israel’s coffers, the Globes and Jerusalem Post reported.
Black money is money earned from illegal activities and includes legal income that is not recorded for tax purposes.
Globes quoted unnamed sources familiar with the matter as saying that there is widespread support from senior government officials, including the head of the Tax Authority, Shai Aharonovitch, to cancel the banknote.
Pressure from these officials is likely behind the rapid progress of the plan, a source said. The authority has been pushing for years to limit the use of cash, and the head of the Israel Anti-Money Laundering and Terror Financing Authority, Ayelet Ostrovich Levy, supports the move, while senior Finance Ministry officials have also expressed support.
Warnings
The expert on Israeli affairs, Dr. Ahmed Al-Bahnasi, believes that this step comes within an Israeli plan led by the Minister of Finance to strangle the Palestinian economy, especially the financial and economic authorities.
There are voices from within Israel warning that the situation in the West Bank could spiral out of control due to economic pressures. These are matters that neither the Finance Minister nor Prime Minister Benjamin Netanyahu cares about, as he is pushing to cancel the 200 shekel note, which makes it difficult for Palestinian banks and individuals to deposit their money in Israeli banks under the current restrictions, thus exposing them to losing the value of their cash, Al-Bahnasi added to Al Jazeera Net.
The problem of the accumulation of shekels in Palestinian banks
It is noteworthy that the Palestine Monetary Authority (the Central Bank of Palestine) warned of the repercussions of Israel’s continued refusal to receive the shekels accumulated in banks operating in the Palestinian markets.
According to data from the Palestinian Monetary Authority, the amounts accumulated annually in the Palestinian banking sector exceed 18 billion shekels (equivalent to 5 billion dollars), while in the past few years they exceeded the 22 billion shekels barrier (equivalent to 6 billion dollars).
Even on the eve of Israel’s war on Gaza, the Palestinian Monetary Authority and Israeli banks were coordinating to transfer the surplus cash, averaging about NIS 4 billion ($1.05 billion) per quarter.
The shekel is considered the main payment and wages instrument in the Palestinian market, and it is the approved currency alongside the US dollar and the Jordanian dinar, according to the Paris Economic Protocol signed in 1994 between the Palestine Liberation Organization and Israel.
As the shekel hoarding crisis escalates, banks are increasingly unable to accept deposits from their customers in Israeli currency.
Costs of the war on Gaza
This step comes at a time when the Israeli budget deficit is widening due to the escalation of military expenditures with the multiplicity of war fronts.
Israel recorded a budget deficit of 12.1 billion shekels ($3.24 billion) in August, according to the Israeli Finance Ministry, which indicated that the deficit-to-GDP ratio rose during the 12 months through August to 8.3%, compared to 8% in July, and compared to a target of 6.6% for the whole of 2024.
Spending on the war in Gaza and its repercussions, which broke out last October, amounted to about 97 billion shekels ($26 billion).
In August, tax revenues grew by 8.1%, and by 1.9% during the first eight months of this year.
Ahmed Al-Bahnasi says that the proposed Israeli move cannot be read in isolation from the repeated Israeli statements about the cost of the war, which has exceeded 200 billion shekels ($52.9 billion) so far, in addition to what Israel will have to pay in compensation to those affected who were evacuated or whose homes or properties were damaged as a result of the war.
Al-Bahnasi adds that there is American discontent and some European countries regarding the continued financial support for Israel in a war that does not end and has no political horizon until it stops.
Under the proposal to cancel the 200-shekel banknote, the following main steps were proposed:
- Cancel the paperThe first and most controversial step is the cancellation of the 200-shekel banknote, which according to the Bank of Israel constitutes approximately 80% of the value of banknotes on the market.
Supporters of the plan say the move would allow a significant reduction in the amount of cash in circulation, forcing tax evaders to report themselves and pay into state coffers to exchange or deposit the notes — or lose them.
The next step is a voluntary disclosure process, which would allow those holding large amounts of cash to deposit it immediately, with “immunity from criminal charges related to failure to report income, and to pay reduced tax without penalties.”