Can Palestine introduce a single currency against a backdrop of political uncertainty?

By | October 23, 2013

Sleibi-Bradford2Jacoub has just completed an MSc in Global Finance and Banking at Bradford University’s School of Management. Research from his dissertation is being used by the Palestinian Monetary Authority (PMA) to develop plans to reintroduce the Palestinian pound and have a single currency.

Currently, Palestinians use three currencies – the US dollar, the Jordanian dinar and the Israeli Shekel. Jacoub, who is originally from Bethlehem, Palestine, believes that a Palestinian single currency could bring many benefits to the region, making trade easier and stabilising the economy. But there are many issues to be considered first, which he explores in this blog.

Since returning to Bethlehem from the north’s top management school, I have been discussing the findings from my dissertation with Mahmoud Bsharat, a research assistant in the macroeconomic department of the Palestinian Monetary Authority (PMA).

It is very satisfying to know that the research I have done whilst at Bradford University School of Management will assist with my country’s policy making and may eventually stabilise the economic climate. But any country thinking of reintroducing a single national currency faces several issues that need consideration (Scotland is another current example, with many currency choices on the table if there is a yes vote for independence).

1. Can the Palestinian pound be introduced at the same time as a central bank?

While I think the Palestinian pound needs to be introduced in parallel with opening the central bank, one of the most important decisions that will need to be made is choosing an exchange rate regime. I believe it should be pegged to the Jordanian Dinar because this will push up the economy, but we also need to make sure that the new pound has the same purchasing power as the dinar.

Unfortunately, I don’t think it is possible for the PMA to introduce the Palestinian pound without moving to a central bank, which it is not yet ready to do. This is because they do not have the money printing equipment that is vital if there is to be a single currency in Palestine.

2. Can a central bank be set up whilst using all three currencies and then a single currency introduced afterwards?

Based on the discussion I have had with the PMA, the answer is no. Residents of Palestine, as well as visitors and tourists, are already confused by having to use three currencies. Before implementing a new currency, the conversion/transition to one Palestinian national currency should be studied very carefully and organised by a central bank. However, the conversion should also be smooth, so the new currency will not lose its value. For example, allowing for a specific period that all currencies should be converted to the main new one.

3. Could a central bank function considering the current political situation?

Most of our problems in Palestine are political ones, from pollution to water shortages to unemployment. The currency issue is a very serious problem in the economy, but it runs in parallel with many other issues that must also be resolved.

For example, we need to be able to import and export goods and services and be free to move from city to city without having to go through checkpoints. Only then, will a single currency be able to operate fully.

FT SleibiI was recently interviewed by the Financial Times about my Bradford University School of Management masters course and dissertation on the Palestinian currency. In the interview, I talked about my background and why, from the age of about 14, I have been interested in researching the effect of currencies on Palestine.

My interview with the FT, whilst at the north’s top management school, now means that people from all over the world will know about the currency issues Palestinians go through every day.

I do believe there will be a single currency in Palestine. As I always tell my friends, I am optimistic and always looking for ways to build a better future. I remain sure that the Palestinian pound will be re-introduced some time soon.

How do you think a Palestinian single currency would be regarded internationally?

Does there need to be peace with Israel before a single currency can be introduced?

One thought on “Can Palestine introduce a single currency against a backdrop of political uncertainty?

  1. Gent

    Single currency is important for Palestine, but there should be more research how other States will accept it, esepecially state in border with Palestine.

    Than experts need to analyze macro and micro effects. In general there should be a lot of work and analyzing before they start with singel Palestine currency.

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