The Bank of Israel today announced that it will buy $3.5 billion in 2014 to offset the effect of natural gas production foreign currency earnings on the balance of payments.
The Bank of Israel added that this purchase program is an additional instrument of its monetary policy and exchange rate policy. It added that it would continue to operate in the foreign exchange market in situations of exchange rate fluctuations, which are not in line with fundamental economic conditions or when the foreign exchange market is disorderly.
In May, the Bank of Israel estimated the effect of natural gas production on the balance of payments at $2 billion in 2013 and that it would purchase $2.1 billion by the end of the year.
In a subsequent report, the Bank of Israel said that its foreign currency purchases under this program would likely last until 2018, when the sovereign wealth fund would begin operating.
Dr. Karnit Flug has been Acting Governor of the Bank of Israel since Prof. Stanley Fischer stepped down at the end of June.
Published by Globes [online], Israel business news - www.globes-online.com - on October 2, 2013
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