Forgotten Ottoman Empire


The proceedings of the committee formed the basis of the Law on the Bank of Israel. In August 1954, the Law came into force, the Bank of Israel from the Anglo-Palestine Bank moved issuing department, and from the Ministry of Finance - Department of Banking Supervision. Currency regulation was submitted to the Bank of Israel from the Ministry of Finance only in 1978.

With the abolition of the restrictions of the constitution gained independence Lebanon. In 1943, the country was formally declared an independent republic. Complete withdrawal of French troops from Lebanon was completed only in 1946, at the same time the French troops left Syria. The same year, Jordan (on the site which Britain formed Transjordan Emirate) officially gained independence. However, until the early 1950s, had the right to keep the metropolis in Jordan military units and military bases.

Preparations for the establishment of the central bank of Jordan began later than in Israel. The Law on the Central Bank was enacted in 1959, but the actual monetary authorities began their work in October 1964, the Central Bank of Jordan inherited the assets and liabilities of the Palestinian Monetary Board. Bank is fully owned by the government, and in order to increase the money supply, its capital was increased from 1 million to 18 million Jordanian dinars.

Metropolitan plans overturned

After the loss of the Mediterranean colonies in the Middle East, Britain made a determined attempt to retain control over the Arabian Peninsula. Saudi Arabia, with its rebellious sheiks empire was lost in 1932 to administer the territory were only principality along the Persian Gulf and Red Sea. With the end of World War II in the territory controlled by Arabia was supposed to create a federation composed of nine principalities, as well as Bahrain and Qatar. However, the wave of national liberation movement overthrew plans metropolis. In 1970, after a long political struggle Oman authorities have relative freedom from Britain. The following year, the empire had left the UAE, which consisted at the time of the six principalities, as well as Bahrain and Qatar.

Gaining political independence is a prerequisite for the organization of national monetary authorities. The first challenge that faced them was to issue the currency. Arab countries had to get out of the sphere of influence of British policy-currency area and obtain emission independence. Then came the task of organizing the banking system. For decades, the Arabian Peninsula, no local banking institutions, resulting in financial services offered by branches of foreign banks. Most Arab states established the national central banks in the first years of its independence.

Directive of the Bretton Woods system

In the period of the Bretton Woods system-tion states of the Middle East a fixed exchange rate to the gold. Fixation occurs indirectly, usually through the U.S. dollar, in some cases through the pound. In practice, the exchange rate to float within 1%. He often went beyond the borders of oscillations by the Agreement of the International Monetary Fund. For example, the rate of the lira could deviate by 5% on either side of the official parity.

In terms of the market economy policy in the Middle East was not a traditional peg. All of them have resorted to regulatory restrictions. Most exchange controls consisted of a few limitations:

- Currency transactions through authorized banks or the State Bank for Reconstruction and Development;

- Compulsory sale of the monetary authorities of currency proceeds from export operations;

- The multiplicity of exchange rates: the overvaluation of import and financial transactions;

- Fixing of the exchange rate for trade transactions and the introduction of a free-floating exchange rate for transactions in financial markets;

- Special accounts for non-residents, the funds from which can be used within the established standards and administrative sanctions;

- Limits on cash transactions in foreign currency for the residents and the national currency for non-residents;

- Prohibition of private gold transactions.


Virtually fixed exchange rate supported by administrative measures. Prescriptive authority appointed the exchange rate, and market participants were forced to legitimate operations "top-down" rate. The alternative is only unofficial parallel exchange market. The "black" market currency trading at a premium, dependent on the degree of development of the national economy.

In Turkey, for example, the premium for the informal exchange market amounted to 30-60%. Despite such a large size, the award was less than the difference between the official rates. In particular, the exchange rate on exports by 40% higher rate of import. In less developed countries exchange premium reached several hundred percent, for example, in Syria reached 250-400%.

Some part of the Middle East and to this day continues with the support of a fixed rate of exchange controls. These countries are characterized currency monopoly and policy planning of foreign trade. Inconvertible currencies now have Iraq, Jordan and Syria. However, there are counter-examples.

In the Arabian Peninsula in 1960-1970-s was absent national financial system. In addition, the oil business brings in enough revenue to both the private sector and the state. Macroeconomic framework of the Arab countries allowed them after independence in the short term to introduce full convertibility. In the 1970s, switched to full convertibility of Saudi Arabia, Oman, United Arab Emirates, Qatar, Kuwait. These countries and today the converted currency. But demand is low, and despite the absence of restrictions, Arab currencies are not popular in the FOREX.