Bank of Israel sounds skeptical about abolishing NIS 200 bill

Following the Globes report of the proposal to abolish the 200-shekel note, and the prime minister’s announcement that a discussion on the issue was needed, the Bank of Israel issued its first public, somewhat skeptical, comment. The bank said it would “present its professional position on such a move, if it is brought up for discussion,” and stressed that “the authority to abolish the banknotes lies by law with the governor.” The Bank of Israel statement continues: “So far, no sufficiently strong professional justification has been presented for abolishing this or that note,” suggesting that it is not enthusiastic about the idea.

In early September, Globes revealed that a group of experts had submitted a policy document claiming that abolishing the 200-shekel bill, which represents the majority of the banknotes used in Israel to store cash, would increase state revenues by more than NIS 20 billion in a single year, a dramatic amount in the problematic financial situation in which Israel currently finds itself due to war, high interest rates, and the country’s credit rating downgrade. However, the document states that the move would involve a mass deposit of all 200-shekel bills within a short period of time, initially voluntarily, with increasing penalties for keeping them later. Ultimately, the document says, it would be necessary to transition to a completely cashless society.

According to sources familiar with the matter, there is widespread professional support for this idea. “The director of the Israel Tax Authority, Attorney Shai Aharonovitch, is very keen on this. Perhaps his weight and motivation in this matter are what led to its rapid progress. The Tax Authority has been pushing for years to limit the use of cash. This is supported by the head of the Israel Money Laundering and Terror Financing Prohibition Authority, Attorney Ayelet Ostrovich Levy, and support can be heard from Finance Ministry officials as well.” Despite all this, it seems that the Bank of Israel is not keen on the matter.

Although the Bank of Israel did not give its reasons, and merely said that it would express its professional position if the matter was brought up for discussion, it seems that there are many difficulties preventing the implementation of such a decision, as there are sectors of the population that use cash extensively, or even exclusively, and do not even have bank accounts. Moreover, the value of the 200-shekel note is low compared to the 500-euro note, which the European Union is gradually phasing out, but its value is ten times greater.

This article was published in Globes, Israeli Business News – en.globes.co.il – on September 23, 2024.

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