Israel’s Foreign Reserves Reached a Record $90b in 2015

Reserves exceeded $90 billion as central bank bought currency to offset shekel strength.

Emil Salman

Israel’s foreign currency reserves exceeded $90 billion for the first time ever at the end of December, boosted by foreign-currency buying by the Bank of Israel to prevent the shekel from strengthening excessively, the central bank reported on Thursday.

The bank said its foreign reserves grew by $1.8 billion in December, lifted by $1.38 billion of forex purchases. Of that, $515 million was bought in the framework of a long-term program to offset the effect of Israel’s natural gas reserves on the exchange rate.

Domestic natural gas has reduced energy imports and the need to spend foreign currency to pay for it, reducing demand for dollars.

The December figure brought the increase in Israel’s foreign currency reserves for all of 2015 to $4.522, a slight increase from 2014 when they rose by $4.315 billion but down from 2013’s $5.884 billion.

Since 2012, the Bank of Israel has been investing foreign reserves held in shares and corporate bonds, although that increases the risk of losses, too. The weighing has been steadily increasing and the bank will now invest up to 12% of reserves in equities and another 6% in corporate bonds.

The central bank didn’t report what it earned on reserves in 2015, but in 2014 it boosted the return to 1.28% from 0.87% the year before. Nevertheless, the return was far lower than the pre-global financial crisis years when it was in the range of 6% to 7%.