PALESTINIAN TERRITORY: Q&A on a new currency
As part of a statehood bid they plan to bring before the U.N. this September, Palestinians are pushing for the creation of a new Palestine Central Bank and the introduction of new currency.
But Jihad Al-Wazir, 48, governor of the Palestinian Monetary Authority, which hopes to soon evolve into the first central bank, says work is needed before reintroducing the Palestinian pound.
“We do not expect that in September we would wake up the next day and find the Palestinian pound all over the place,’’ he told the Los Angeles Times recently. “That’s not going to happen. The way it looks now, people would like it in the first week and enjoy the fact that the pound is back, but would they put it in their pocket and use it the next day? That would be the challenge.”
Q: Are we going to see the emergence of a Palestinian central bank and a currency any time soon?
A: Rather than focus on printing money, the focus is on ensuring that an economic system, economic transmission mechanism and the proper infrastructure for successful currency are in place before we discuss the issue of issuing currency. Everything [is being] done not to focus on simply printing Monopoly money, but to ensure that the macroeconomic framework of the Palestinian economy is conducive to the proper conduct of monetary policy. We are working on introducing the central banking law, which will ensure the independence of the central bank. So once these elements are there, then it becomes possible to conduct proper monetary policy in a small open economy like ours and to be sure that once we issue the currency, we will not become like typical third-world currencies with hyper-inflation and so on.
Q: Does this mean you are going to wait for a state before issuing your own currency?
A: The actual physical printing of currency requires a political decision; even sovereignty is not required. You can have currency without sovereignty. The Europeans, for example, have given up their currency to somebody else. You can dollarize the economy and still have a currency. The issue is what would be the most useful to economic growth and generating jobs, and that is why our focus was on the macroeconomic trends instead of the microeconomics. Of course it is essential to have a sovereign state before issuing your own currency because part of keeping the rate for currency is the ability to have control over borders, which we do not have at this time due to the Israeli occupation. Israel so far controls the borders of the Palestinian territories and imposes restrictions on movement and access. However, there are also ways to work around that. Our job is to be ready.
Q: Charges of corruption have plagued the Palestinian Authority for some time. How would you guarantee that once you start printing money it will not become a tool for corruption?
A: While I believe these claims have been exaggerated, we, nevertheless, have created four independent offices in the PMA in the transformation plan. We have an independent legal office, we have an independent ethics office, we have an independent audit office and we have an ombudsman. We are recognized as one of the most transparent organizations in the region. Central bank independence is critical because if the government has control over it, then it might ask it to print more money to finance its deficit, for example. This is something that is very inflationary. The central bank law will ensure independence, that there will not be fiscal dominance and that we will not be told by anybody about our monetary policy, which will be based on objective criteria and not on political criteria.
Q: Are you personally in favor of having a currency now?
A: There is a lot of emotional contact associated with the resurrection of the Palestinian currency. We are very anxious that if and when a political decision comes to issue a currency, that once that currency is issued, it will have value, that it will not face what many [faced] in the third world countries that issued currencies. Because of the lack of proper infrastructure, lack of proper system, and monitoring frameworks that are essential for a successful currency, they were doomed to failure. Our job and our duty is to ensure that we have the proper frameworks, we have the proper infrastructure, we have the proper laws, that once the decision is taken for a small open economy, our monetary policy will be conducive to growth and will not lead to [a] ... crisis.
Q: Whose face would be on the currency, Yasser Arafat, Mahmoud Abbas, or just a picture of the Dome of the Rock?
A: Once we get ready to issue currency, we will have a national committee to decide these things. We expect choices to vary. Whether to put faces on the currency or something else is something to be debated. But for us the issue of security features of the currency, the more technical aspects of the currency –- denomination, the volume, the pricing -– the technical issues that require a lot of work is more important. Even from a technical point of view, we need at least 18 months to two years to issue the currency, to do the preparations, the awareness campaigns, the printing and all these aspects. We do not expect that in September we would wake up the next day and find the Palestinian pound all over the place. That’s not going to happen.
-- Maher Abukhater in Ramallah, West Bank