Getting Money in Gaza: An Interview With Palestine's Central Banker

A Palestinian man stands outside a bank with locked ATMs in Gaza city on December 6, 2008. Banks in the Gaza Strip closed the
A Palestinian man stands outside a bank with locked ATMs in Gaza city on December 6, 2008. Banks in the Gaza Strip closed their branches this week due to lack of liquidity and Israel's refusal to authorise cash transfers to the besieged territory. AFP PHOTO/MAHMUD HAMS (Photo credit should read MAHMUD HAMS/AFP/Getty Images)

Amidst the destruction and death in Gaza, the Palestine Monetary Authority has kept cash flowing to a besieged population struggling to survive in a devastated economy.

Gaza's 45 bank branches have been mostly closed during the nearly month-long conflict, with working ATMs depending on the availability of generator fuel and the daring of bank staff to maintain them.

"Crisis management is key to our survival," said Jihad al-Wazir, governor of the authority, the territory's central bank. "I had to send banking supervisors with a suit and tie to go to the back of every branch and check whether they have enough fuel in the generators or not."

In preparation for conflict, all branches since 2007 have been forced to have generators to run the ATMs or face fines, al-Wazir said. But keeping the cash machines running depends on fuel deliveries entering the enclave every few days, he said.

Given Israel's seven-year old economic blockade of the sealed-off enclave, which had already severely weakened Gaza's economy before the conflict erupted, there's no guarantees that fuel will make it in.

With credit card transactions hobbled by electricity cuts, there's enough cash in Gaza, trucked in well in advance with Israeli approval, al-Wazir said. One branch has been made inoperable by Israeli bombing, but the cash survived in the safe, he said. The branch servers are located in the relative safety of the West Bank.

During a humanitarian pause on July 27, it was "a hard choice" whether to open the branches, al-Wazir said. "But there is a real need," he said. "The economy is dead. Stores were closed."

He said he was shocked that bank staff arrived to open the branches "because nobody believed the ceasefire." The banks were mobbed with people desperate for cash. Salaries of Palestinian Authority workers, but not Hamas, were paid and letters of credit issued for goods to come into Gaza.

"Humanitarian assistance must also go through the banking system," al-Wazir said. "It is the lifeline of the economy. Gaza's survival is dependent on the banking system that's why it's so important that we opened."

He said 80,000 people crowded the branches by noon, three hours before the humanitarian pause was to end. But there was not enough time to pay everyone. "So I called the Israeli military coordination," al-Wazir said. "I told them I have at least 80,000 civilians in the streets of Gaza and they will not disperse before 3 p.m."

"They told me if they don't fire on us, we're not going to fire on them," he said. "And if they fired, they would fire back." al-Wazir also informed the U.S., the U.N. and Palestinian President Mahmoud Abbas.

The shelling started five minutes after the pause ended, he said. But the banks stayed open for three more hours and ferried people home in ambulances and taxis. "No one was hurt, it was a miracle.," he said. "It is a testament of the compassion and dedication of the bank staff to risk their lives."

On another occasion the previous week when Gaza was under fire, a branch generator malfunctioned in an open plot, next to a mosque, he said.

"Israel has been targeting mosques and open plots," al-Wazir charged. "This generator, which could be mistaken for a rocket launcher, was out there and who is the gutsy guy who's going to go fix it?" He decided to leave it un-repaired and let the branch run on the two or three hours of electricity a day that Gaza is getting.

Al-Wazir functions as the central bank governor of the monetary authority that was created in 1997 following the Oslo accords three years earlier that set up the Palestinian Authority.

The authority is a bank regulator and sets monetary policy, but not interest rates, like other central banks. That's because the Palestinians do not have their own currency. The dollar, the Jordanian dinar and the New Israeli Shekel are accepted in Gaza and the West Bank.

Plans to re-introduce the Palestinian pound, the currency under the British mandate until 1947, have been in the works under the terms of Oslo, but al-Wazir says economic conditions, even in normal times, are not yet right for it.

Despite its limited function, he said his authority is fiercely independent from the PA political authorities. "Our independence is well known to the public because when the government wanted to borrow more than we thought was fiscally responsible, we refused," he told me in an interview in his Ramallah office. "That created a big crisis."

Other central bankers in Arab countries who criticize their governments are fired within a week, al-Wazir said. "Not only did we criticize the government we stopped the banks from lending to the government," he said.

"So I packed my bags expecting the usual. I cleaned my desk and waited for the phone call from the prime minister or from the president and the phone call never came. I thought that was a sign of real political maturity," he said.

The authority has also showed its independence with Hamas, which is in severe economic difficulty. Because Hamas runs almost totally on cash, the closing of the Rafah border crossing with Egypt has made it difficult for suitcases of cash mostly from Qatar to get in, al-Wazir said.

The authority fought off an Hamas hostile takeover attempt a couple of years ago when it tired to buy shares on the Qatar exchange of a Palestinian bank. "It was very important to protect the banking system by enforcing a very strong firewall between us and Hamas in Gaza," he said.

From 2007 the authority has instituted a strict anti-money-laundering policy to protect the bank's international correspondence with foreign banks under anti-terrorism laws. "We had to shut down 6, 000 bank accounts for Hamas-affiliated guys when they tried to get into the banking system," al-Wazir said.

The largest percentage of Palestinian transactions are dollar transactions that go through New York and are subject to the Patriot Act, al-Wazir said. "So if you pay somebody who's on an anti-money laundering or counterterrorism list these jurisdictions will no longer deal with you."

"If you cannot send a wire transfer in dollars, you are no longer a bank," he said "You become a money changer."