Currency

   The Israel pound (lira Yisraelit) became the first currency of the modern state of Israel in August 1948. It replaced the Palestine pound that had been introduced by Great Britain in 1927 and was subdivided into 1,000 mils. Pursuant to the Bank Notes Ordinance 5708-1048, in August 1948, the Anglo-Palestine Bank (later Bank Leumi-Lelsrael B.M.) began to issue new banknotes and coins on behalf of the state of Israel. On these banknotes, the term lira replaced the pound, and the Hebrew pruta replaced the mil. In 1960, the subdivision of the Israel pound (IP) was changed from 1,000 prutot to 100 agorot per 1 IP.

   Consistent with the general trend toward the Hebraicizing of names of senior Israeli government officials and governmental institutions, legislation was adopted in 1969 instructing the minister of finance to change the name of Israel's currency from lira to shekel. The choice of the new name for Israel's currency was itself deeply symbolic. The use of the shekel as a measure of weight, currency, and taxation was referred to in the Jewish Bible: "This shall they give— everyone who passes through the census — a half shekel of the sacred shekel, the shekel is twenty geras, half a shekel as a portion to God" (Exodus 30:13). The payment of the shekel was also the symbolic dues established for membership and voting rights at the first congress of the World Zionist Organization that met in Basle, Switzerland, in 1897.

   The law instructing the minister of finance to change the name of Israel's currency from lira to shekel left the timing of the change to the minister's discretion. As it was, the minister of the day chose to implement the change only in February 1980, within the context of an effort by Menachem Begin's Likud-led coalition government to persuade the Israeli public to accept a program of severe austerity designed to curb rampant overspending and inflation. The Israel shekel (IS), equal to 10 lirot (IPs) was divided into 100 new agorot, each equal to 10 "old" agorot. The further devalued New Israel Shekel (NIS) was introduced in 1985 as part of an economic stabilization program approved by the Government of National Unity headed by Prime Minister Shimon Peres. The NIS was equal to 1,000 old shekels and was divided into 100 agorot, each equal to 10 old shekels. Initially affected by the Bank of Israel's tight regulatory policy, the NIS has been a freely convertible currency since 2003. It is used as legal tender in Israel as well as throughout areas of the West Bank and the Gaza Strip under the control of the Palestinian Authority.

   See also British Mandate for Palestine.