Monetary Affairs

February 28, 2011

1. Summary

One result of the Oslo Accords was to assign responsibility for monetary and financial issues in the oPt to the Palestinian Monetary Authority (PMA). The PMA is an independent institution created to serve a broad range of central banking and policymaking functions. Upon its creation in 1995, it began carrying out responsibilities such as banking supervision, payment services, research, statistical compilation and analysis. The PMA initiated a process of restructuring and internal reform in July 2006 that aimed to establish modern central banking institutional capacity to support an independent State of Palestine.

2. Key Facts

  • Financial transactions in our banking system are heavily regulated and meet or exceed international best practices, especially with respect to regulations prohibiting the financing of illegal activity.
  • We continue to maintain a disproportionately high savings rate despite the dire economic situation in the Gaza Strip resulting from Israel’s illegal siege and blockade and despite the myriad restrictions imposed under Israel’s continuing military occupation of the West Bank.
  • Our authorities continue to implement existing agreements despite numerous hardships imposed by Israel’s occupation and unlawful actions (e.g., the looting of banks by the Israeli military in the years after the Second Intifada).
  • The Israeli government has designated the Gaza Strip a “hostile entity” and since September 2007 has severed business and banking relations and severely restricted the transfer of cash to our banks in the Gaza Strip. These unilateral Israeli actions destabilize our banking system and create a serious impediment to achieving a two-state solution.

3. International Law

We are committed to adopting international banking laws and regulations and best practices.

4. Our Position

Key issues to be negotiated include broadening the capacity to issue and manage a national currency and the assumption of full control over monetary policy. Our central aims are to achieve financial and monetary stability, foster sustainable economic growth and develop the necessary monetary capacity to support our independent state. We expect that the end of Israel’s occupation and the lifting of Israel’s restrictions on imports and exports to our markets will allow for a significant expansion of trade with Arab countries and the European Union.

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