Bank of Israel funnels tens of millions into Gaza
Central bank about to exchange worn-out banknotes for Hamas government to cash salaries transferred from Ramallah. Hamas: We are transferring counterfeit money to Israel, and they give us real shekels in return
The Bank of Israel is about to transfer tens of millions of shekels to the Gaza Strip this week. It has been less than six months since the last time this occurred. Hamas' website claims that the amount to be transferred is NIS 81 million (about $21 million).
A senior official in Israel's banking system claimed that the sum will be smaller than what Hamas claims, but confirmed that tens of millions of shekels will be cashed for residents of the coastal enclave.
The Hamas website asserts that the Bank of Israel is cashing money of two kinds for banks in the Strip. Firstly, it is exchanging worn-out banknotes for fresh ones, and, secondly, it is cashing money that Salam Fayyad's government in the Palestinian Authority transfers to Gaza as part of its aid program to the Strip.
Officials in the Israeli and Palestinian banking systems confirmed Hamas' claims.
The Bank of Israel declined to comment.
Hamas website. ;Transferring fake money to Israel'
Hamas is claiming that the Bank of Israel will exchange some NIS 31 million (about $8 million) worth of worn-out banknotes collected in the Strip for Gazan banks. This is a procedure carried out periodically for Israeli banks and Palestinian banks in the West Bank.
Deputy finance minister in the Hamas government Ismail Mahfouz boasted on the movement's website, "We are transferring counterfeit money to Israel, and they transfer real money to us in exchange."
The Palestinian Authority in Ramallah is transferring NIS 50 million (about $13 million) to the Gaza Strip. The Bank of Israel changes the money for bankers in Palestinian banks, and enters the cash into the Strip. A few months ago, the Fayyad administration transferred hundreds of millions of shekels into the Gaza Strip via bank transfers.
Why do they need the money?
It should be noted that the Bank of Israel is not breaking any law in transferring the funds because the money exchanges are carried out for Gaza branches of legal banks that are not based in the Gaza Strip, such as Cairo Amman Bank.
However, the money transfer raises some difficult questions. Why is the Bank of Israel taking care of the financial needs of bank branches located in territory deemed a "hostile entity"? Given that Gaza is under blockade and shekels close to never leave the Strip, why do Gazan banks, under the complete discretionary control of Hamas, need more cash?
This point is made even more poignant when considering the fact that most of the goods entering the Gaza Strip are from Egypt, purchased mainly in US dollars. Goods purchased in Israel, on the other hand, are paid for by bank checks sent ahead of each deal. Therefore, any additional cash injected into the Gazan economy remains in a closed system circulating between the banks and Gazan retailers. Shekels nearly never leave the Gaza Strip.
An Israeli military official explained, "The goods are transferred into the Strip via sterile territory, and they are not brought in if the money is not paid in advance. The Gazans procure the goods that enter with advance checks. There are rare cases in which goods reach the sterile area and they pay with case, but this only reaches a few million shekels a year."
The money transfer stands in stark opposition with Foreign Minister Avigdor Lieberman's new policy that he declared on the Gaza Strip by which Israel will initiate a total economic disengagement from the coastal enclave. The foreign minister declined to comment on the article.
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