The Accountant General's Office at the Finance Ministry has been engaged over the past two months in heavy hedging transactions against Israel's external debt, at a volume of $1.2 billion, in an effort to reduce exposure to currency volatility in the foreign exchange market. "The transactions are part of a working plan by the Accountant-General's Office aimed at hedging against the government's exposure to acute foreign currency fluctuations subject to changing market conditions," said Accountant-General Shuky Oren. "In light of the developments in world markets, it was decided to advance the multi-annual work plan regarding the management of government debt." In a move to reduce the exposure to sharp fluctuations in the foreign currency exchange, the Finance Ministry for the first time approved the transaction of about $700 million in currency swaps, whereby dollar-denominated debt due in 10 years was traded for shekels, while also buying dollar-forwarded contracts to secure the dollar exchange rate at time of payment. In addition, the bank said it swapped another $500 million in 10-year dollar-denominated debt for euros. The country's foreign-currency-linked debt amounted to $31.1b. at the end of 2007, of which 90 percent, or $28b., is dollar-based. Oren emphasized, though, that the forward contracts were a tactical tool used by the government and that there was no intention by the government to intervene in the exchange rate. "It is our obligation to manage government debt in a responsible manner and adjust ourselves to the developments in world markets," said Finance Minister Ronnie Bar-On. Moreover, the ministry said that the hedging transactions carried out over the past two months were an addition to similar hedging steps of $750m. executed over the last year and a half. "The action taken by the Finance Ministry was a smart move, which shows that the ministry is taking the situation in world markets seriously by acting accordingly," Shlomo Maoz, chief economist at Excellence Nessuah told The Jerusalem Post. "The measures taken will not have an impact on the dollar-shekel exchange rate." Since the beginning of the year, the dollar-shekel exchange rate dropped by about 10%. This week, the dollar rate fell to the lowest level against the shekel in more than three weeks, trading at NIS 3.46. Traders are concerned that inflation in excess of the central bank's target range of 1-3% for a fourth month will prevent it from lowering interest rates. The dollar-shekel exchange rate dropped 2.3% in March, climbing to an 11-year low trading at 3.35.