Besieged Gaza banks glutted with Israeli shekels, destitute of other foreign currencies

by Saud Abu Ramadan

GAZA, March 3, 2010 (Xinhua) --

Husam Barakat, a 45-year-old Gaza resident, went to the Arab Bank branch several times a day trying to draw 2,000 U.S. dollars from his account, but was always told that the bank did not have any dollars.

"My bank account is in dollars, but when I went to withdraw dollars, the employees told me they didn't have any dollars but only (Israeli) shekels," said Barakat, who owns a small business in Gaza, adding "the problem is not only with the Arab Bank, but with all Gaza banks."

After the Islamic Resistance Movement, Hamas, (won the 2006 parliamentary elections but refused to recognize the Zionist state of Israel before negotiations as rival Fat'h did), the Israeli occupation government) had imposed a tight blockade on the territory, which negatively influenced all aspects of life, including the transfer of foreign currencies, mainly U.S. dollars, Euros and Jordanian Dinars to Gaza.

"The problem is prevalent, so I have no choice but to withdraw Shekels instead of dollars in order to run my business and cover my daily costs, although I lose part of the money when I go to a money exchange and pay extra money to change my Shekels into dollars," said Barakat.

The dollar's rate in Gaza banks is 3.7 Shekels, while the rate is 3.9 Shekels at Gaza money exchange shops.

Over the past three years, Gaza Strip banking system was badly damaged after these banks glutted with the Israeli currency, but lacks foreign currencies liquidity. The Shekel is the only currency transferred to Gaza Strip from Israeli banks, and from Palestinian banks in the West Bank.

The Palestinian National Authority of President Mahmoud Abbas has been paying the monthly salaries of around 70,000 civil and security servants in the impoverished enclave, ruled by Hamas, in Shekels.

However, the question which remains is where the foreign currency liquidity that used to be in the Gaza Strip before Hamas seized control of the enclave goes. Economists said the answer is that the foreign currencies are used in purchasing goods from Egypt and sold in Gaza in shekels.

Gaza dealers, smugglers and owners of underground tunnels, dug under the borderline between the Gaza Strip and Egypt, used for smuggling goods and fuels from Egypt into Gaza, pay dollars and Euros to Egyptian smugglers and sell their goods in Gaza in shekels.

"This is how the foreign currency in Gaza vanished, and banks glutted with shekels. Israel only transfers shekels to Gaza banks, and tunnels owners purchase goods from Egypt in foreign currencies and sell them in Gaza in shekels," said Majed Tahsin, a director in one of Gaza city's banks.

He added that the crisis of the foreign currencies liquidities emerged after Israel imposed the siege on Gaza and prohibited the entrance of all kinds of goods, products, raw-materials and fuels into the Gaza Strip, "in addition, it only transfers Israeli currency to Gaza Strip banks."

In the Gaza Strip, there are nine banks; the major ones are the Arab Bank and the Bank of Palestine. Other banks are just branches of banks located in the West Bank and several Arab and foreign countries.

"The crisis of the foreign currency's shortage had a negative impact on Gaza banks," said Tahsin, adding "this crisis had led to problems of trust between the banks and their customers."

He listed three major problems that were a result of the crisis; first is the lost of trust between the banks and its customers, second is restricting investments mainly in purchasing properties of lands and apartments, which are mainly paid with U.S. dollars and third is that the banks' profits declined and affected their organizational structures."

"Many customers closed their bank accounts and preferred to save their money in cash at home in fear that if they deposit their foreign currencies in the banks, it will be difficult for them to get all their money back when they want to use it," said Tahsin.

Tahsin said that in order to solve such a problem, the banks in Gaza scheduled the payments in dollars or any other currency to the customers within a week or several days until the customers get all their money back.

"I believe that the Palestinian Monetary Authority is the one, which is responsible for solving this problem," said Tahsin.

Mo'en Rajab, a Palestinian professor in economy at the Gaza- based al-Azhar university said that the reason behind the lack of foreign currencies in Gaza is "political in the first degree," adding "also because Israel had considered the Gaza Strip three years ago as a hostile entity."

"Therefore, Israel doesn't transfer foreign currencies to Gaza, and only transfers shekels because it has agreements with the PNA to pay salaries to the Palestinian employees," said Rajab, adding "due to the siege, Gaza banks can't transfer shekels back to the banks in the West Bank or Israel."

Salim al-Bara'asi, owner of money exchange store said "Gaza suffers from a lack of foreign currencies," adding that the crisis "has affected my business.'"

(The Israeli occupation government has continued its brutal siege of more than 1.5 million Palestinians, enabled by support and collaboration from the US, EU, and Egypt, in order to force Hamas to surrender to the policies and wishes of the Israeli government).

Editor: Deng Shasha