Foreign currency deregulation, as far as households are concerned, will mean the lifting of all restrictions on the daily use of foreign currency. Once deposits may lawfully be opened in other countries, and dollars withdrawn from Israeli banks unrestrictedly, then dollars or any other foreign currency may also be used to pay for any product or service in Israel.
But the fact that an act is permitted does not, of itself, make that act worthwhile. A commission is payable for converting the shekel into foreign currency. In recent years it has not been a good idea to maintain a foreign currency holding for the long term, as the devaluation rate is not keeping pace with domestic inflation. In any event, one hardly sees the unsophisticated citizen manoeuvring so as to suit the currency to the payment he needs to make (francs for an automobile imported from France, yens for a Japanese computer), or juggling currencies based on their relative weights internationally.
Where accounts are even now usually settled in foreign currency, such as rent, or the sale of apartments or automobiles, payment may be made, here or there, in foreign currency. But, as stated, the mutual reckoning, as things stand, is merely a criterion for linkage, whereas neither party would profit from actual conversion, since that involves a commission.
In addition, it is only in the short term that a seller will benefit by maintaining the consideration for an apartment he has sold in dollar currency. The variation of apartment prices in Israel does not, in the long run, fully parallel the movement of the dollar. This is evidenced by the fact that people who sell an apartment and must wait to buy, today prefer to utilise the option currently offered by the banks, of a dollar-shekel deposit, which, when the time arrives, gives the higher consideration of the two tracks. Based on the above, one may suppose that foreign currency payment will be restricted to instances in which people already have foreign currency in their possession, left over from foreign travel and suchlike.
In fact, as long as State of Israel does not fully link itself to any particular currency, an idea promoted under Yoram Eridor’s dollarisation drive, people will continue to think in dollars and to operate in shekels in certain areas, and otherwise to think and act in shekels. Today’s pre-Euro Europe is an example of the situation that will obtain in Israel. Despite freedom of currency on the European continent, each nation uses its own legal tender; and the transition to the Euro, as everyone knows, involves a very lengthy process, an important part of which is persuading the public to abandon its own home currency.
Published by Israel's Business Arena April 12, 1998