2 shekel coin 88 298.
(photo credit: Bank of Israel)
Increased use of cash, population growth and the growing economy boosted the volume of cash being circulated in Israel by 17.5 percent in 2005, the Bank of Israel said Tuesday.
Coins and bills in circulation totalled NIS 24.4 billion at the end of last year, up from NIS 20.8b. at the end of 2004, according to data collected by the central bank's currency division. The year's rate of growth was more than double the 7.2% average annual growth of the previous two years.
While such a rise theoretically would reflect both economic growth and inflation, the year's negligible inflation level would support a more complex explanation of the rise in cash as resulting from relatively low interest and inflation rates in comparison with past years, said the chief economist of a leading Israeli investment house. Israelis are holding less money in savings accounts and deposits, and more in cash and other investments due to low interest rates and in order to avoid paying commission on superfluous deposits and withdrawals, the economist said, adding that the rate of growth in cash holdings would slow down once the "transition period" comes to an end or if the interest rate rises back to old levels.
The economist noted that the same trends were seen in the M1 money supply figure, which reflects both cash in circulation and deposits in current teller accounts held by households at commercial banks. M1 grew fully 23.8% in 2005, but has already slowed down to 15.5% in the year between the end of June 2005 and June 2006.
As in past years, bills accounted for fully 95% of the full volume, with only 5% of the cash held in coins, the central bank said.
More than half the coins in use were 10-agora pieces, which are used widely for change on public transportation, for instance, the central bank said. One-shekel pieces, often used in parking meters and vending machines, accounted for 22% of the coins in circulation. Five- and 10-shekel pieces account for only 3% each of Israelis' pocket change, according to the data.
The currency division also detected a drop in the use of 20- and 50-shekel bills and a rise in the use of 100- and 200-shekel bills in 2005, which it attributed to the year's economic growth. The number of automatic cash dispensers operating in the country of various types also rose in 2005.
Bills belonging to the previous 1985-1999 series were given a five-year extension, and may be exchanged at banks until the end of 2010.
NIS 20 bills endured the most wear, due to their exclusion from automatic teller machines, relatively quick turnover rate and the public's lack of care in handling them, the currency division said, adding that 20-shekel bills issued in 2006 were given an extra coat of protective layering to improve their durability.
Alongside its annual report, the currency division took the opportunity to unveil the design of a two-shekel coin, which it said would be issued in the next few months.
"The addition of the NIS 2 coin will make cash payments more efficient, particularly [those done] by big users [of coinage], and save in issuing expenses, bringing down the costs of producing and maintaining cash," the central bank said.
The coin will revive the double cornucopia motif - a symbol of abundance - common to the coins of the High Priest monarchs of the Maccabean dynasty, King Herod the Great and the neighboring Nabataean kingdom.