Three main currencies are currently traded in the Palestinian Authority (PA): the dollar, the shekel, and the Jordanian dinar. Different sectors use different currencies. Since the wages of Palestinians working in Israel are paid in shekels, and most Palestinian trade is with Israel or through Israel, most goods in the PA are sold in shekel prices. For example, the Palestinian consumer price index is computed according to shekel prices.
On the other hand, assets not traded with Israelis, such as real estate and shares on the Nablus Stock Exchanges, are quoted in Jordanian dinars. Due to its stability, the dollar serves as the preferred currency for short and long-range savings. Palestinian businesses almost universally accept payment in dollars.
Official Jordanian sources have occasionally expressed fears concerning possible negative influence of a Palestinian currency on the Jordanian dinar. Even without their own currency, Palestinians have been switching from the dinar to the dollar. In the second half of 1998, dinar bank accounts in the PA fell by $150 million, which constitutes 8% of all accounts; a similar rise in dollar accounts was recorded. Shekel accounts remained about 14% of bank accounts during this period.
Examination of Palestinian bank accounts points to the domination of the shekel in daily life; more than 60% of shekel deposits are in current accounts. Dinars, on the other hand, are deposited in short-term deposits (34%) and savings accounts (29%); dollars are deposited mostly in savings accounts (over 70%). These are official figures; dollar demand is apparently even greater than reflected in official figures.
Due to lack of trust in the banking system on the part of the Palestinian public, and since most banks have operated in the PA only since 1991, many Palestinians store their money under the pillow. According to various estimates, these savings are in dollars.
Published by Israel's Business Arena on October 26, 1999