By, Anshel Pfeffer
2 min read
ByAnshel Pfeffer, Anshel Pfeffer
Shmulik is sitting behind a 3in-thick glass window in a small flat in Meah Shearim that has been divided by a concrete wall and a steel door. This is one of half a dozen “black banks” that are the economic pipeline of Jerusalem’s Charedi community. He looks out at the empty room.
“Business is slow,” he says.
Not that long ago, the bank was packed at all hours, mainly with local residents selling dollars or cheques.
In Charedi areas, thousands of families rely on handouts from individuals and foundations from abroad, mainly the United States. They are the main customers of the “black banks” which give a slightly more favourable rate of exchange than the official banks and also buy cheques without making customers open an account.
“All these families have been hit over the past two years by the strong shekel and weak dollar,” says Shmulik. “If they can, they get relatives in America to buy stuff for them and send it on. But most of them just wait for a day on which the dollar is slightly up and come in then.”
But it is not just poor Charedi families who are feeling the effect of the strong shekel on American philanthropy. “Every time the dollar goes down by 10 more agorot, I can say goodbye to another one per cent of my budget,” said Jewish Agency Director General Moshe Vigdor.
Two thirds of the Agency’s budget comes from Jewish federations in America in dollars, but is mostly spent in shekels. Even before the global financial crisis, the organisation cut 10 per cent of its $320 million budget, mainly due to currency fluctuations.
The shekel used to be a non-player in the money markets; decades of high inflation and a shaky economy could be charted by the steady decline of the lira, shekel and then new shekel against the dollar. Even when the shekel became more reliable, Israelis stored dollars under their floor-tiles, and many services, from flat rent to airline tickets, were quoted only in dollars.
In 2005 it all changed. A new Governor of the Bank of Israel, Stanley Fischer, growing numbers of foreign investors flocking to Tel Aviv and the chronic weakness of the dollar combined for the first time to keep the exchange rate at somewhere between four and five shekels.
From 2007, it steadily descended, sometimes almost as low as three-and-a-half dollars. When the economic crisis broke, there was a blip when the dollar went up again but when the Israeli banking system proved to be much stronger than its American counterpart, the shekel was on the rise again.
This week the exchange rate was around NIS 3.95 to the dollar, and NIS 6.4 to the pound.
“At the beginning it was great because we were paying less rent,” says Shira Shlomi, a Hebrew University student. “But when I came to renew the contract, the landlord changed the monthly rent to shekels and put the price up.”
A senior defence official said: “For the IDF, it was useful because so much of the equipment and arms are purchased in the US. But for the local industry it is making things much harder as the army prefers now to shop abroad.”
Yossi Freiman, of the Prico investment house, said: “So far, the Bank of Israel has tried to stabilise things by buying small amounts of dollars, but the government has stayed out. But, if the dollar continues to go down and gets close to three shekels, it will have to start buying dollars. Israel’s economy is ultimately based on export. If the dollar crashes, so will the local market.”