Bank of Israel Management Committee chairman Dan Propper was highly critical when speaking to "Globes" about the shekel-dollar rate issue. “The currency is too strong, and it is a problem,” said Propper who served for decades as chairman of Osem Investments Ltd. (controlled by Nestle SA (SWX:NESN)) (TASE: OSEM), the Israeli food giant that exports NIS 200 million of goods a year.
This week, Propper presented the Knesset Finance Committee with the Bank of Israel budget, which reached NIS 939 million (not including commitment of a further NIS 600 million). He was asked to make it clear that he has no influence over the bank’s monetary policy, but only on the bank’s managerial processes, such as salaries and budget. In fact it is solely the Monetary Committee that makes decisions on monetary policy, and not the Management Committee that Propper heads.
”An eternity”
“I am against setting an exchange rate floor, but I am in favor of taking administrative steps,” says Propper. “I think we should delay every currency conversion deal over $20 million by two days. I am telling you that an exporter would have no problem with this, but, for currency speculators, 48 hours is an eternity.”
The Bank of Israel has authority to impose bureaucratic restrictions to delay foreign exchange operations. The Bank of Israel implemented such measures in January 2011, when it imposed “mandatory reporting” for Israeli and foreign residents who execute foreign currency trades or futures trades in foreign currencies over $10 million per day. The following day, the Bank of Israel imposed “mandatory liquidity” for corporate banks in foreign currency deals with parties outside of Israel. These measures are still in effect.
Yesterday, “Globes” reported that Minister of Finance Yair Lapid and officials in his ministry are working on a “package of measures” to support exports, which will be presented in the coming days. In a special meeting held with exports representatives, the exporters explained that the shekel-dollar exchange rate is too low, that there is a need for an immediate remedy, and that the shekel-dollar rate should be raised to NIS 3.8/$.
Sources involved in the process expressed some pessimism regarding the government’s ability, and, more importantly, the government’s desire, to take drastic steps in favor of exports. Moreover, the Bank of Israel is not prepared to take drastic steps. At the beginning of this week, representatives from the Bank of Israel - Director of the Research Department Nathan Sussman and Director of Market Operations Andrew Abir - attended a Ministry of Finance work meeting in which they stated that they have no intention of changing the current policy. Three days ago, Governor of the Bank of Israel Dr. Karnit Flug refused to address the matter of setting an exchange rate floor, and went so far as to say that Israeli exports are not sensitive to fluctuations in the exchange rate, particularly high-tech exports.
Published by Globes [online], Israel business news - www.globes-online.com - on January 9, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2014