Historical Sketch

In the early 16th, the Ottomans conquered the Levant region from the Mamluk Empire and subsequently created the two provinces of Aleppo and Damascus. During World War I, Great Britain and France occupied the territory and kept it after the Turkish defeat. The British portion was divided into Palestine and the Transjordan. In the mid-1930s began a series of insurgencies in the Palestine territory which led to the creation of the State of Israel in 1948 the West Bank of the Jordan river with predominantly Arab population, which annexed by the Transjordan Emirate in 1950. In the Seven-Days-War of 1967, Israel conquered back the West Bank of the river Jordan, which forms part of today's Occupied Palestine Territories.

Monetary History Overview

The British military administration for the occupied Ottoman territory declared the Egyptian Pound current in 1918, which had already been circulating in the region during the Turkish rule. In August 1926, the Palestine Currency Board began operations and issued paper money for both British territories, Palestine and the Transjordan. The Palestinian Pound was at par with the Sterling.

In 1948, the state of Israel was founded on the former Palestinian territory. The Anglo-Palestinian Bank obtained issuance privilege for the new state, until the Bank of Israel took over as the new central bank in 1954. The Israeli Pound replaced the colonial currency at par, keeping the Sterling peg in place, also through the devaluation of 1949. Beginning 1954, the difficult economic situation triggered a 64% devaluation, and the Pound repegged to the US Dollar. In the following, the Pound got devalued several times, reaching more than 85% until mid-1975, when the exchange rate got floated. The decline went on and even accelerated such that in February 1980, a currency reform was carried out. One zero was cut, and the 1st Israeli Shekel became the new unit. Stabilization was, however, not achieved. On the contrary, the depreciation sharply accelerated such that more than 99% of the value was gone within the next five years. In September 1985, a second currency reform was carried out. This time, three zeros were cut, and the 2nd Israeli (New) Shekel became the new unit. The decline was slowed down in the following, but continued steadily, amounting to more than 60% in the late 1990s. Since the mid-2000s, the Shekel has stabilized and even recovered some of the previous loss.

Israel joined the International Monetary Fund (IMF) on 12.07.1954.

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