The Bank of Israel, as it announced on May 13, 2013, will purchase foreign exchange in coming years in line with the estimated effect of natural gas production on the balance of payments. The Bank’s assessments of the total impact on the balance of payments resulting from natural gas production and the foreign exchange purchases will be updated periodically and reported to the public.
The Bank of Israel projects that the overall effect of natural gas production on the balance of payments in 2015 will be $3.1 billion and it will purchase foreign currency during 2015 accordingly.
As noted in the past, this purchase program is an additional instrument of the Bank of Israel’s monetary policy and of exchange rate policy which is consistent with it. As in the past, the Bank of Israel will continue to operate in the foreign exchange market in situations of exchange rate fluctuations which are not in line with fundamental economic conditions or when the foreign exchange market is disorderly.
(YWN – Israel Desk, Jerusalem)
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One Response
OK, I’m not too savvy in financial matters and I don’t really understand the upshot of this announcement, so I’d appreciate a brief explanation from someone who does.
I’ve been reading how Israel made major natural gas discoveries recently and is poised to reap a lot of revenue from the export of this natural resource, which is a good thing.
So, does the “purchase of foreign exchange” by an Israeli bank reflect some sort of financial windfall resulting from that anticipated revenue stream or is it something unrelated? Is this a good thing for the Israeli economy or only meaningful to the Bank of Israel alone?