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While Hamas terrorists from the Gaza strip invaded and murdered an estimated 1,200 Israelis in cold blood on October 7, there had been close economic integration between the 2 peoples in recent times and it would surprise many to know that the Israeli Shekel is the major currency of trade in the Gaza strip.
MoneyCentral looks at how the Israeli Shekels became the major currency of the Gaza strip despite hostilities.
Since Hamas, which is considered a terrorist organization by the U.S and European Union took control of the Gaza strip in 2007, it has been unable to improve the lives of its 2.3 million people.
A UN report in August said 81% of Gazans were poor and cited an unemployment rate of 47%. This meant that workers from Gaza often sought employment in Israel, and as of October 6 (before Hamas struck) about 21,000 workers were being allowed into Israel daily from the Gaza strip to work in many of the farms and Kibbutz that were attacked by Hamas.
These workers usually earned much more than they could in Gaza and helped to bring some form of economic integration between both territories (Israel and Gaza) before the Hamas rampage.
Israeli Shekel as main currency in Gaza
Because the Gaza strip does not have its own currency, since there is no State of Palestine as yet, it is forced to use other currencies to trade, chief of which is the Israeli Shekel and sometimes the Jordanian dinar.
The Israeli Shekel is however used for the majority of commercial transactions, especially in retail – shops and restaurants.
United States dollars are also a bit common although they are not used in retail settings but $100 bills can be dispensed in the ATM machines.
United States dollars could also easily be exchanged for shekels at the many exchange services that were available before Israel began its latest military campaign in the strip.
The Oslo Peace accords signed in 1995 between Israel and the Palestinians also helped to integrate the Palestinian economy into the Israeli one through a customs union.
Protocols (as part of the Oslo accords) regulated the relationship and interaction between Israel and the Palestinian Authority in six major areas: customs, taxes, labor, agriculture, industry and tourism.
The Protocol determined that Israeli currency, the New Israeli Shekel (NIS), is used in the Palestinian territories as a circulating currency which legally serves there as means of payment for all purposes and to be accepted by the Palestinian Authority and by all its institutions, local authorities and banks.
Since 1 January 2003, the new shekel has been a freely convertible currency. Since 7 May 2006, new shekel derivative trading has also been available on the Chicago Mercantile Exchange. This makes the new shekel one of a few world currencies for which there are widely available currency futures contracts in the foreign exchange market.
It is also a currency that can be exchanged by consumers in many parts of the world.
Israel’s strong economy and stable currency
Israel is a superpower of sorts in the region with a largely stable currency and strong resilient economy as opposed to the bankrupt Lebanon, war torn Syria and struggling Egypt.
Israel’s shekel has mostly recouped its losses since the war between Israel and Hamas began, with the central bank revealing last week that it sold more than $8 billion in October to defend it.
At the onset of the war, the central bank had pledged to sell as much as $30 billion from its foreign-currency reserves — and to provide as much as $15 billion more via swaps — to support the shekel.
The Israeli central bank still has enough fire power to defend the currency during the war with Hamas with $191.2 billion in foreign reserves as at October 2023.
Israel’s $500 billion economy has also benefitted from recent gas exports from fields in the offshore Mediterranean adding to other diverse sectors like technology, agriculture, real estate and financial services.
Egypt the only other country with a border with Gaza (and whose currency in theory could be used in the strip), is however struggling with economic downturn, and its authorities have devalued the currency three times since March 2022, roughly halving the Egyptian pound’s value and sending local prices soaring.
History of Gaza
Egypt ruled Gaza until it lost it to Israel in the 1967 Six-Day War. Israel pulled out of Gaza in 2005, however it maintains control of Gaza’s airspace and maritime territory and, along with Egypt, has long enforced a blockade of the territory.
Gaza Strip is a territory of about 25 miles (40 km) long and 7.5 miles wide bounded by Israel, Egypt and the Mediterranean Sea.
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