The business sector repaid a net $2.2 billion in foreign currency
credit during the first half of 2005, double the amount repaid during
all of 2004.
Large amounts of foreign currency credit issued by banks were repaid
during the first half of 2005, due to the depreciation of the shekel
against the dollar, and concern that this trend would accelerate. The
Bank of Israel reports that the business sector repaid a net $2.2
billion in foreign currency credit from Israeli banks during the first
half of the year, double the amount repaid during all of 2004. Total
foreign currency credit was $27 billion.
Foreign currency credit as a proportion of total bank credit fell to
24% in the first half of 2005, its lowest level in ten years. The
highest proportion of 32% was reached in first half of 2002, on the
eve of Operation Defensive Shield.
Most economic sectors repaid foreign currency credit. A quarter of
repayments were by contractors and construction companies, which
reduced their exposure to a shekel depreciation, since most of their
business is in shekels.
Repayments of foreign currency credit occurred while the interest rate
gap between the shekel and dollar steadily narrowed, and the
probability of a rise in exchange rate risk increased.
The Bank of Israel said the effect of repayments of foreign currency
credit was offset by a supply of foreign currency originating in
foreign investment and a surplus in Israel's balance of payments
current account.
Published by Globes, Israel business news - www.globes.co.il - on August 3, 2005
