Israeli Finance Minister Expresses Little Concern Over Strong Shekel

Moshe Kahlon dismisses problem as the ‘troubles of the rich’ and says it’s a boost to consumers

Israeli Finance Minister Moshe Kahlon in Jerusalem, on October 9, 2018.
\ Ronen Zvulun/ REUTERS

Finance Minister Moshe Kahlon expressed little concern about the strengthening shekel in an interview with Bloomberg news published on Tuesday.

Israeli exporters have expressed concern about the impact of a 6% appreciation of the shekel against the dollar since the start of the year and Bank of Israel Governor Amir Yaron has come under pressure to respond, possibly by intervening in the market.

Three weeks ago he vowed not to raise interest rates, as the central bank had previous signaled, in an effort to ease the pressure on the shekel.

“These are the troubles of the rich, troubles of a strong state,” Kahlon said in an interview on Monday, referring to the country’s strong economic growth, low debt relative to gross domestic product and a persistent current account surplus.

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Those factors have all contributed to the currency’s strength in recent months. Since August 9, the shekel has lost some ground to the dollar, but on Tuesday the greenback traded lower, losing about 0.6% against the shekel to a representative rate of 3.524 shekels.

Kahlon conceded that the strong shekel would make Israeli companies less price competitive in overseas markets, a critical issue in the country’s export-reliant economy. But he took the view that this was offset by the benefit to consumers from lower prices for imported goods.

Kahlon, who merged his Kulanu Party with the Likud in May, faces the voters in less than a month and has built his reputation as a middle class-friendly finance minister.

“There is no doubt that there are two ways to look at it,” Kahlon said. “The exporters will complain about it, and justifiably. But the consumers will be happy, because the cars will be cheaper, the trips abroad will be cheaper.”

Although there are measures the treasury could take to mitigate demand for the currency, Kahlon conceded that his views were not critical to the shekel exchange rate.

“I don’t know how much influence” the Finance Ministry “has on this,” he said.