September 4, 1985
The new Israeli shekel is introduced as the currency of the state. The original shekel, named for a biblical currency, came into use in 1980 as a replacement for the Israeli pound, responding to decades of requests rooted in a desire to have a Hebrew name for the state’s currency.
The old shekel was introduced after the pound experienced frequent devaluations against foreign currencies in the 1960s and 1970s, but the arrival of the shekel failed to prevent a period of hyperinflation in the first half of the 1980s. With inflation nearing 450% and projected to reach 1,000%, the Knesset passed the 1985 Israel Economic Stabilization Plan, which included a cut in government expenditures and temporary price controls aiming to deflate the shekel and stabilize the economy. Part of the plan was the introduction of the new shekel, worth 1,000 of the old shekels.
The new shekel arrives with many problems. Because of its greater value — a dollar buys only 1½ new shekels, compared with 1,503 of the old shekels — the new currency makes daily transactions easier for citizens, stores, government officials and computers, but confusion results from the continuing circulation of the old shekel after the introduction of the new shekel. To combat the confusion, the government launches a national campaign on billboards, in newspapers and on television to explain the switch, answer common questions and ease the transition.
The new shekel becomes a freely convertible currency whose value is set by international markets in 2003. It remains the official currency of Israel.