Responsible Party and Year Completed: Åke Lönnberg, 2023
Link: TBC
Status: Completed
Contact: Åke Lönnberg – ake.lonnberg@gmail.com
Executive Summary:
The paper, “A Currency Board for Palestine,” delves into the feasibility and implications of establishing a Currency Board Arrangement (CBA) for Palestine. It posits that amidst various monetary frameworks, a CBA emerges as the most viable option to ensure the stability of a new domestic currency in Palestine. This choice is underpinned by the need for a significant systemic and institutional overhaul, necessitating widespread political consensus and adjustments in legal and institutional frameworks.
Short term priorities:
- Garner broad domestic political support and international backing, including from Israel, to legitimize and stabilize the proposed currency system.
- Strengthen legal and institutional frameworks to support the implementation of a CBA, ensure the Palestinian Monetary Authority (PMA) operates within a robust legal environment.
- Commit to stringent monetary and fiscal discipline to uphold the integrity and stability of the new currency.
Long term priorities:
- Establish a fixed exchange rate system pegged to a strong reserve currency, preferably the U.S. dollar, to facilitate stable economic transactions and foster trust among the Palestinian business community and the international market.
- Ensure the domestic currency is fully backed by foreign assets, with the PMA maintaining 100 percent reserves against domestic currency issuance to guarantee its commitment to the fixed exchange rate.
- Protect the PMA from political pressures that may undermine the currency board’s effectiveness, thus ensuring the long-term viability of the new currency.
Immediate Priorities / Proposed Next Steps:
- Finalize the selection of the U.S. dollar as the anchor reserve currency to leverage its stability and international acceptance.
- Engage in dialogue with international stakeholders, including financial institutions and governments, to secure initial investment and support for the currency board’s establishment.
- Develop detailed operational guidelines for the PMA regarding the issuance and management of the new currency, focusing on transparency, security features, and anti-counterfeiting measures to build and maintain public confidence in the currency.