BoI loses NIS 35.4b from shekel gains

The Bank of Israel reported a loss of NIS 35.4 billion following the marked appreciation of the shekel against the dollar and the euro in 2021. The income from foreign exchange reserves, excluding exchange rate differentials, totaled about NIS 16 billion. Most of that derived from gains due to the rise in value of the equities, which were partly offset by revaluation losses of bonds as a result of the increase in yields towards the end of the year

The Bank of Israel wrote, “Due to the growth in the Bank’s foreign exchange reserves, the lion’s share of exchange rate differential expenses is not realized, and therefore a change in the trend in the value of the shekel vis-à-vis the currencies in the reserves portfolio could offset their effect.

The deficit in the Bank of Israel’s equity widened to NIS 63.5 billion at the end of 2021 from NIS 43 billion at the end of 2020 resulting in a loss of about NIS 20 billion in 2021 compared with a loss of NIS 4.5 billion in 2020.

The Bank of Israel’s loss in 2021 stemmed from the financial tools that it used during the year such as purchasing foreign currency and Israeli government bonds, and providing loans in order to cope with the consequences of the economic crisis caused by the Covid pandemic. The loss increased the negative equity of the Bank of Israel, which resulted in printing more money but was debt to all intents and purposes.

The Bank of Israel’s balance sheet grew 83% to NIS 369.1 billion in 2021, as a result of operating special instruments in the markets. The increased balance sheet was mainly due to foreign currency purchases. The Bank of Israel’s foreign exchange reserves grew by about NIS 105 billion last year to about NIS 662 billion, or $ 213 billion.

“The Bank’s activity to attain its objectives and to carry out its functions is not intended to maximize profits, but rather to achieve economy-wide economic goals,” the Bank of Israel said.

Published by Globes, Israel business news – – on March 31, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

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