What Currencies Does Palestine Use in Its Economy?

The Palestinian territories operate within a distinct monetary framework, utilizing multiple currencies rather than a single national currency. This arrangement influences various aspects of financial life, from daily purchases to large-scale investments and international trade. Understanding the roles of these currencies provides insight into the practical economic landscape.

Primary Currencies in Use

The Israeli New Shekel (ILS) serves as the primary currency for most daily financial transactions throughout the Palestinian territories, encompassing both the West Bank and Gaza Strip. It is widely accepted by businesses for everyday goods and services, including retail purchases and various payments. Many wages and salaries are also denominated and paid in ILS.

The Jordanian Dinar (JOD) also holds a significant role, particularly within the West Bank economy. While not as prevalent for small daily transactions as the ILS, the JOD is commonly used for larger financial dealings, such as real estate, vehicles, and university tuition fees. It also functions as a store of value for substantial assets.

Beyond the ILS and JOD, the United States Dollar (USD) sees occasional use, primarily for specific high-value transactions or international dealings. It may also be accepted in certain tourist-oriented areas. While its general circulation for everyday purchases is limited compared to the shekel and dinar, the USD can be relevant for credit card payments or for employees of some financial institutions.

Factors Influencing Currency Use

The reliance on multiple currencies stems from economic agreements and practical considerations. The Paris Protocol, an economic annex to the Oslo Accords signed in 1994, formalized the circulation of the Israeli New Shekel as legal tender for all purposes, including official transactions. This agreement established a framework that integrated the Palestinian economy with Israel, necessitating the shekel’s use.

Cross-border trade and economic integration with Israel and Jordan further necessitate the use of their respective currencies. A substantial portion of Palestinian trade is conducted with Israel, making the shekel a practical and essential medium of exchange for businesses. Similarly, historical ties and ongoing, albeit limited, economic interactions with Jordan contribute to the continued relevance of the Jordanian Dinar.

A primary reason for the multi-currency system is the absence of an independent Palestinian national currency. The Palestinian Authority’s inability to issue its own currency leads to reliance on foreign currencies for economic activity. This means the Palestinian Monetary Authority (PMA) cannot pursue an independent monetary policy, contributing to the continued circulation of external currencies.

The stability and convertibility of the Israeli New Shekel and Jordanian Dinar make them practical choices for daily transactions and economic activity. These currencies are perceived as stable, fostering confidence in their use for transactions and as a store of value. Established banking infrastructure and exchange mechanisms further reinforce their widespread adoption.

Daily Financial Transactions

The multi-currency system directly impacts pricing and payment methods for goods and services across the Palestinian territories. Most everyday items, retail goods, and services are priced and paid for in Israeli New Shekels (ILS), including groceries, transportation, and small purchases. For larger purchases, such as electronics or durable goods, prices might sometimes be quoted in Jordanian Dinars (JOD), especially in the West Bank.

Payment for these goods and services is predominantly made in cash, with the ILS being the most common currency exchanged. While bank transfers are utilized, particularly for larger transactions, credit card acceptance is less widespread in many smaller establishments. This emphasis on cash transactions means individuals often need to carry physical currency in shekels for daily needs.

Wages and salaries are frequently paid in Israeli New Shekels, particularly for those working within the territories or for Palestinian entities. However, some larger companies or institutions, especially those with historical ties to Jordan, might pay their employees in Jordanian Dinars. This can influence personal financial planning and the choice of currency for savings.

Local banks in the Palestinian territories are equipped to handle accounts and transactions in these different currencies, primarily ILS and JOD. Customers can maintain accounts in either currency, facilitating various financial operations. However, some banks may primarily dispense Jordanian Dinars from their ATMs, requiring further exchange for daily shekel use.

Currency Exchange and Value

Currency exchange services are readily available throughout the Palestinian territories, primarily through licensed money changers and banks. These establishments facilitate conversion between the Israeli New Shekel (ILS), Jordanian Dinar (JOD), and sometimes the US Dollar (USD) and other international currencies, ensuring individuals and businesses can exchange funds as needed.

The exchange rates between the ILS, JOD, and USD fluctuate based on international market dynamics, similar to other global currencies. These rates are influenced by economic factors affecting the issuing countries. For instance, the Jordanian Dinar has been pegged to the US dollar since 1995, which provides a degree of stability in its value relative to the dollar.

Within the local context, each currency carries a perceived stability and purchasing power. The Israeli New Shekel is widely accepted and serves as the practical benchmark for most prices and daily expenses. The Jordanian Dinar is often seen as a stable store of value, particularly for larger assets, due to its peg to the US dollar. The US Dollar is utilized for its international recognition and stability, especially in high-value or cross-border dealings.