Fischer defends Gaza cash transfer

Bank of Israel Governor: We can't be responsible for the collapse of a banking system that uses the Israeli shekel.

Stanley Fischer 88 248 (photo credit: Ariel Jerozolimski)
Stanley Fischer 88 248
(photo credit: Ariel Jerozolimski)
The government's decision to transfer NIS 100 million in cash to Gaza Strip banks was justified, Bank of Israel Governor Stanley Fischer said Thursday. "It is the Bank of Israel's role to maintain the quality of notes and coins and to adjust the volume of cash to economic changes in places where the shekel is the main currency," he said. "The Bank of Israel stepped in, among others, because it cannot be responsible for the collapse of a banking system that uses the Israeli shekel." Amid harsh criticism from Knesset members and dozens of family members of victims of terrorist rocket attacks, an armored truck carrying NIS 100m. arrived in Gaza from Israel on Thursday to help ease the cash crisis so that 70,000 local salaries could be paid. Defense Minister Ehud Barak on Wednesday approved the cash transfer from Palestinian banks in the West Bank to Gaza. His decision came in response to a "personal appeal" from Palestinian Authority Prime Minister Salaam Fayad and a request from Fischer. Israel has not allowed cash into Gaza since October, causing severe shortages in local banks. The refusal to let Palestinian banks send money to their Gaza branches was one of the restrictions Barak imposed in response to the rocket attacks. In recent months, disagreements have emerged between the Bank of Israel and Bank Hapoalim and Israel Discount Bank over the provision of banking services to Gaza. Following the government's decision to declare Gaza a "terrorist entity," Hapoalim and Discount have been considering an end to dealings with Gaza banks. They are the only two Israeli banks still working with the PA in correspondent relationships with Gaza banks, including providing clearing services. The Bank of Israel cannot force Israeli banks to do business with Gaza banks, but it can prevent them from suspending clearing activity, since the main currency in Gaza is the shekel. The central bank recently asked Hapoalim and Discount to delay cutting off ties with Gaza banks and continue activity, at least until the end of January.