Annual Report on Exchange Arrangements and Exchange Restrictions 2005
Chapter

ISRAEL

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2005
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(Position as of December 31, 2004)

Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: September 21, 1993.
Exchange Arrangement
CurrencyThe currency of Israel is the new Israeli sheqel.
Exchange rate structureUnitary.
Classification
Independently floatingAs the de jure horizontal bands have ceased to have any effect on the exchange rate and the authorities have not intervened in the foreign exchange market, the exchange regime of Israel has been reclassified, effective January 1, 2004, to the category independently floating from the category exchange rate within crawling bands. Previously, the exchange rate of the new sheqel was managed against a basket of currencies comprising the dollar, the euro, the pound sterling, and the yen. The market exchange rate fluctuated within a crawling band in response to market forces. The upper and lower limits of the band, which had been adjusted daily, were originally derived to reflect the annual difference between the domestic inflation target and the projected inflation of the main trading partners. In the past few years, however, the practice changed, such that only the slope of the lower limit has been reduced, whenever warranted, while the upper limit has remained unchanged at a steeper slope. The slope of the upper limit has been 6% on an annual basis since July 26, 1993; the lower limit has been flat since December 23, 2001. The width of the band, based on the average of the upper and lower limits, was 60.2% at the end of 2004.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketYes.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payments arrangementsNo.
Administration of controlNo.
International security restrictionsNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)No.
Controls on exports and imports of banknotesNo.
Resident Accounts
Foreign exchange accounts permittedBanks are required to classify the accounts of residents of areas under autonomous Palestinian administration as a separate group and to report these accounts on the basis of the same principles that apply to nonresident accounts.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadYes.
Accounts in domestic currency convertible into foreign currencyYes.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresWith the exception of agricultural products, imports are free of quantitative restrictions. A special regime applies to imports from countries that restrict or prohibit imports from Israel.
Import taxes and/or tariffsNo.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesExcept for the exports of oil and certain defense equipment, most exports do not require licenses.
Export taxesNo.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsNo.
Controls on capital and money market instrumentsNo.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsNo.
Controls on direct investment
Outward direct investmentThe Foreign Exchange Regulations require direct reporting to the Controller of Foreign Exchange of outward direct investments exceeding $5 million or its equivalent. New immigrants and Israeli citizens returning to Israel after having resided abroad for seven years or more are exempt from direct reporting for a three-year period.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactionsNo.
Provisions specific to commercial banks and other credit institutions
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsThe same reserve ratios apply to bank accounts held by residents and nonresidents. Reserve requirements against resident foreign currency accounts are denominated in local currency, whereas reserve requirements against nonresident foreign currency accounts are denominated in foreign currency.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsThe same reserve ratios apply to bank accounts held by residents and nonresidents. Reserve requirements against resident foreign currency accounts are denominated in local currency, whereas reserve requirements against nonresident foreign currency accounts are denominated in foreign currency.
Provisions specific to institutional investors
Limits (max.) on securities issued by nonresidentsYes.
Other controls imposed by securities lawsNo.
Changes During 2004
Exchange arrangementJanuary 1. The exchange regime of Israel has been reclassified to independently floating from the category exchange rate within crawling bands.

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