Palestine’s Central Bank Governor Quits on a High Note
Azzam Shawwa served as governor of the Palestine Monetary Authority, the central bank of the Palestinian Authority, from November 2015 to January 2021. Previously, he served as general manager of the Palestine Commercial Bank; general manager of Quds Banks; minister of energy in the Palestinian Authority; Gaza branches coordinator for Arab Bank, the largest banking group in Palestine; and foreign relations manager for the Bank of Palestine. Shawwa also served as chairman of the Association of Banks in Palestine and was a board member of the Palestine Investment Fund.
Shawwa was born in 1963 in Kuwait City and later relocated with his family to the Gaza Strip. He studied at Christian Brothers University and has a bachelor of science degree in mathematics from LeMoyne-Owen College in Memphis, Tennessee. He is married to Amal Bseiso and has three children: Tamer, Nadim, and Aida.
The Media Line: Governor Azzam Shawwa, thank you so much for joining me on Facing the Middle East.
Shawwa: Thank you very much! Thank you also for your usual presence all the time.
TML: Governor, you have been involved in banking for many years. You probably can’t even remember how long. You were running the International Monetary Fund for the Palestinian Territories. How difficult a task has that been in putting together the banking infrastructure?
Shawwa: Really, it’s a long time; almost 30 years over the different several banks, and for the last five years, I was the governor for the PMA, which is the Palestine Central Bank.
You know, I have the accumulation of experience. It helped me to support the governor. It was years of hard work and trying my best to take the PMA to the international [arena] to be more credible among all international institutions that are important to us like the International Monetary Fund, the World Bank, Arab financial institutions, Arab monetary funds, and other European-American-Israeli institutions.
And today we are a member of most of the clubs where it’s needed to be. If it’s the PMA – or remember the governor is also chairing another banking institution, the deposit insurance. Also, the FFU, the Financial Follow-up Unit. We could have become a member of all the international institutions fully. A PMA is the only thing left just to change the name, to be Palestine Central Bank. The recognition is there among all the international [institutions] and the credibility of two central banks. That’s where I left the office.
I left at that stage. It was a challenging position. You have to go around, travel a lot, and also to convince everybody of your story. And you are credible like everybody else.
TML: You’ve been short of cash at times, but full of hope. And also, you managed to get through many obstacles. What were the core challenges?
Shawwa: Always the challenge is to try to come out with some kind of credit facilities to lend to the minister of finance. Somehow you don’t know when the credit facility is going to be paid, except to trust that it will be paid.
TML: What was the financial situation several years ago? I mean, you really took in the money problem and you changed it around, until of course COVID[-19]. So, how did that happen?
Shawwa: Five years ago, we were allowed only to have 300 million shekels as a limit to ship to Israel. And in terms of access of cash, on December 31st, where it was almost the last day for me before I resigned, it was 1.5 billion shekels. So, it’s five times extra.
TML: To what do you attribute that rise? From 300 million shekels to over a billion is a huge increase.
Shawwa: I would say, hard work of negotiation and of building trust; and getting support from several institutions around the world. Also, I have to give credit to the Central Bank of Israel. Our relationship with the Central Bank of Israel was bank-to-bank. It wasn’t a political issue between Israel and Palestine. So we, both of us, could separate ourselves and remain independent. Unfortunately, a lot of people don’t understand what it means that we’re staying independent. If you are independent, it means that you can do the business that you are in to do it, according to the mandate of the institution that I’m heading.
Anyway, we had to do a lot of research. It had a lot – several [modes of] documentation about where our cash is coming from. We hired several consultants.
They were international, and there were also local consultants from Israel and from Palestine. They work independently to show both the PMA and the Central Bank where the cash comes from, and it was proven where the cash comes from. So, it’s more of the cross border of every day. Palestine is the second-largest trader with the US, so it’s a huge trade. Not all of it goes through the banking system. One thing we have [is that] Gaza cannot transfer from Gaza. So, cash has to be coming out of Gaza against legal trade, because nothing goes into Gaza except what’s been approved from the system – [the] Palestinian and Israeli system, but on the other hand, we couldn’t transfer against the trade. So, that was another issue and brought us a lot of cash plus the other things that we were working on [such as] how to really finish this issue once and for all.
Yes, we will have a Palestinian cash center responsible for all of this cash, and since PMA is credible internationally, the cash will be going on a daily basis with no limit. The other thing is that they’re clearing checks with Israel, and that’s also needed to have a solution for the long term because always there is the worries of the correspondent in Israel. So, we figured we should have an international solution and we agreed on [an] international solution, and hopefully, very soon it will be implemented and start working. It looks like it might take like a year or so to have the system ready, especially in Palestine. We are e-clearing. Now, the checks are… It’s not manual anymore, and in Israel, it’s the same. So, we just need to connect our system with some kind of international setup to have it also clear and away from any political disputes. That’s what’s the most important thing is: not to touch it with politics. So, we need immunity and indemnity to this body. And that’s what is in the process.
TML: There was a cutting off of the relationship between Israel and the Palestinian Authority in the Palestinian Territories, and yet you had a relationship personally with Karnit Flug, head of the Bank of Israel. You couldn’t maneuver without having these relationships. Is there a big difference between the realities on the ground, and the political arena?
Shawwa: I would agree with you, but at least maybe that was the kind of music that we’re playing. Somehow, we could have harmony where it’s good [and] separate between the political, which is reality on the ground and what we have to do. And we have to move forward. And that’s what we did on several issues. That’s how we started with 300 million shekels and ended up with the 1.5 billion shekels. Even the new governor continued the same theme and the same spirit.
Also, what’s good is that the international community like the Europeans, the Americans, Canadians, British and Swedish are all keen to support separating the banking entity to stand alone such as the Central Bank of Israel and the Palestine Monetary Authority.
TML: What was your biggest concern or problem that you encountered in dealing with the Israeli side?
Shawwa: That suddenly in Israel that you will have a party that wants to show off. So, they’ll adopt something against the Palestinians, have it publicized, and then it will be up in the Knesset. And then a new law will pass and several things happen [making matters more difficult] – that was always my concern.
TML: For many years here in what’s going to be the Palestinian state there has been talk about your own currency, and yet when you go into money changers or banks, you’re talking in American dollars, [Jordanian] dinars, Israeli shekels. How do you maneuver? Because really, you are operating in shekels.
Shawwa: Yes, in a sense. When Oslo was signed, there was a worry that, if we issued a currency, politically, economically, and financially, how is it going to be? How strong will it have to be to sustain? To be honest, I’m glad that we didn’t do that at that time and still we’re not ready to adopt a full currency, though you mentioned the euro, the [Jordanian] dinar, the [US] dollar, and [Israeli] shekel and so on. So, we have a basket of four foreign currencies that every day the clearing of the checks is [consisting of] four currencies within our system. Now, with Israel, it’s only shekels, but within our system, our payment system is four currencies. Our ATM, you can go and test [it], many of them will have three currencies. Not all have foreign euros, not really. It’s a currency more for trade, but not for use on a daily basis.
Also, our reserve requirements [are] over four currencies. So, we do manage a reserve management on a daily basis for the four currencies to have the whole [package]. You have the clearing; you have the ATMs; you have the payments. So, we need to make sure that every day it’s a zero balance. So, it’s an effort, but we’re managing.
TML: You were talking about the bifurcation between Gaza and the West bank. It is very difficult to operate when you have a separation of two entities that don’t necessarily work together. We talked about, challenges, and again, I need to ask you the greatest challenge here. How do you operate when you’re worried where is the money going to go and keeping checks and balances for the international arena to see what’s happening?
Shawwa: You see, when I first got into office, one of my first challenges was how to look at the chart of banking in Palestine and try to make sure that somehow, we have a challenge. When you’re a governor, on a daily basis you have Israel on your side. In Gaza, it’s a different political system [that] is ruling Gaza, wrong or bad, it’s not my problem, but that’s reality. And you have, of course, the authority that has the longevity, chaired by President [Mahmoud] Abbas. Especially when Hamas and Fatah are throwing things at each other, and so we’re stuck in the middle. We have branches in Gaza. We have branches in the West Bank. And as I mentioned, we have several branches, some of them in east Jerusalem. So, I have to play the role of how to stay away from everybody, where to make sure that the decision that I take is a decision signed by one governor.
It needs to be implemented in Gaza. It needs to be implemented on the branches that we have, under the jurisdiction that we were allowed to start with, and of course, the West Bank. They all have to be signed by one-by-one man, Governor Shawwa. That was a challenge, and the challenge was to everybody since we’re allowed to work independently. And that was my top priority: to convince everybody that when we are working independently, meaning we are doing the right thing for the people, who cares about the politics here or there, but it’s independent. For sure, I got supported from the three parties who were in charge – President Abbas, the Gazans in Gaza and from Israel. They said, “Yes, let’s see how he’s going to manage the business.” And I did manage the business in a way that it wasn’t easy. It was tough, especially from day one.
I [was] sworn into office in November and just a few weeks later we passed a law [that] has to do with fighting terror and money laundering – otherwise, Palestine would have been on one of the international blacklists. I had to convince everybody that we should do it fast. And we did. On December 27th, which had happened [to be] my anniversary, but it was a nice gift for that year, President Abbas signed the decree. I handled the law; now we have this. Everybody needs to understand that this is to protect the rights of the Palestinians. This is to protect the image of Palestine. This has to do with helping Palestine to be more transparent and among the international [community]. And we are credible, like any other country, fine. We have a lot of difficulties, but that doesn’t mean [that] financially we are not complying to the international standard.
It’s the same [in the] US, Israel, Canada, UK, Egypt, Jordan, Saudia Arabia. The same rules. And we had to start implementing [it] and work on it. That’s, what’s called a country evaluation, and it was a big challenge [which] is how to convince everybody that yes, we can do it, but we need time.
TML: Governor, you’re at the height of your career and you resigned. Why?
Shawwa: It’s a very good [question]. Being honest and transparent, I’m a very hard worker [as] governor or man who always gives the trouble and the headache to the governor, and I [was] sworn in as a governor, to respect the law and also to fulfill the law and to do anything according to the law. That’s my mandate. So, meaning anything [that] I would do, it has to be according to the law, that’s either the PMA law or the bank’s law. That’s the two major laws that I have to always have in my mind, sort of before I sign. It needs to be legal.
Last year, 2020, we went into the dilemma that there was a military Israeli decision [that] was signed that you will go after any banks or bankers or whoever that deals with the prisoner’s issue [payments to families of those imprisoned for violent attacks on Israelis or families of those who lost their lives. – ed.] That started in April, and in April that was reality, and we have to face it like the law that was passed in 2019 in the Israeli Knesset. And the political decision was that we should fight to the end. And there was a committee initiated. It was actually chaired by me, even though I’m the governor of the PMA. I shouldn’t be chairing any committee that has to do with [the] political, but I accepted [this] so we can find a solution altogether. And it was a committee between the government, and the head of the prisoners, and also the banks, and the PMA.
What we had to do is refine the president’s law. Then came the idea of having a small entity that has a bank for the prisoners. We said, good, but it has to be independent, [and] not connected to the PMA and to the banking system, because of all the international notes [and] the concern that I was telling you throughout this interview, since we are fulfilling and applying to the international [committees] and that we don’t want anything that can go wrong with banks and [our] correspondence.
Everybody was on the board at the same time when we started, but when we realized that at the end, we’re going to get our license and connect to the bank, to the PMA, that’s a different concern. So, we start having the discussion back and forth on how to do it correctly, properly, to serve the cause, and also not to not to come up with a new story. And finally, there was a decision [which] is [that] we have to just try to find a solution to the prisoners away from the banks and the PMA, the PMA and between the board of the PMA, and the government who make decisions together. It’s not just a one-man show decision. It’s a board decision.
TML: President Abbas has served 15 years of a four-year term. Elections are now being called. Do you think it’s the right time?
Shawwa: I think [it] is [better] being late than never. There has never been the right time in Palestine, but really, I mean, knowing throughout the years, every time the election question was raised, not everybody was ready for it. And I don’t say that [about the] president. I can show you that from seeing or being there close [to] all of the year, no, he was always ready all the time. I never had the worries about him as a president, but it’s the system, the region, the seriousness of everybody to go for elections, so maybe now it’s the right time.
TML: There have been attempts for Fatah and Hamas to reconcile. At least six that I can think of. Why would this one work?
Shawwa: It’s the international [community] which is surrounding everybody and supporting everybody where they really come closer to each other, but in order to make sure that everything will go to the best [purposes] to improve the life and the political level of the Palestinians. It seems [that] everybody, after a long time, they realize that the only thing for us [is] to [make a] reunion and to get united and just go for the elections. And we’ll see that hopefully, we’ll have new blood that will come to the political arena, that also they will serve their country
TML: In 2006, Hamas won the elections.
TML: History tells us what happened. It’s not the case. They’re not in the seat of power. Why would the International Community recognize Hamas today?
Shawwa: It seems [that] the whole political arena changed. In 2006, there were different political parties. I mean, they’re still the same, but no, in some countries, even the parties have changed… So, Palestine and the elections and the parties in Palestine [are] getting together. I think it’s also part of this new era and hopefully [it’s] a positive and good era for everybody.
TML: Azzam, I’ve interviewed you in the past. I’ve heard you talk about ways that you can find solutions. You spoke about the concerns in terms of establishing a new bank. It was to service the prisoner families. Am I not correct?
Shawwa: Correct. Yes. This is true.
TML: This is a very delicate issue, of course. And you’re talking right now about doing things the right way. Was there a difference of opinion? And I want to reiterate that question in terms of the leadership. I mean, did you feel that there was an obstacle in terms of the prime minister disagreeing with how to go about it or the president himself?
Shawwa: No! Without going into the details, it’s just a different approach I would say of doing things. With the leadership, no, never ever has there [been] any dispute, but [has been] very supportive. That’s what I received throughout the years, and that’s how I could succeed in doing the mission that he assigned me for and was sworn in in front of him. Besides that, it’s just a… I would say it’s different approaches, different opinions, a different way of seeing things. I would conclude it this way.
TML: Is President [Joe] Biden’s election a good thing?
Shawwa: Yes, it is.
Shawwa: At least we have a new era. It doesn’t have to be as beautiful as the Palestinians want, but it’s a new era where we could have new doors, new windows, new opportunities. Different people are going to be there and [in] offices where they have a different way of thinking; different political agendas as President Biden is [from] what have we heard so far. He has a different agenda completely than [former US President Donald] Trump, and how good it is, where [it’s] going to take us is still too early. But from all that comes out of his team, it’s good things. It’s a good starter for the Palestinians, at least I think, [and] for the Middle East [and] for the world,
TML: Separating the actual peace negotiations, there were tangibles that were going on here in terms of aid, in terms of projects. A lot of that stopped in the last four years.
Shawwa: This is true.
TML: Do you think that you will see many more projects developing under the Biden Administration? And what, for example, do you foresee?
Shawwa: I’m seeing a different perspective, [a] different formula of relations between the US and Palestine, and of course saying that this will take us to a different level of cooperation in the back and forth meetings either in Washington or in Ramallah or any other places that could happen. And also, that will take us to a different financial and investments [potential].
TML: Give an example.
Shawwa: The USA, they could come back and work on infrastructures [and] on all the projects that you remember. They were involved with so many things. It’s not only for infrastructure – but material[s], health, education, and security.
TML: Palestinian people believe that President Trump was the mouthpiece for the Israelis. They felt that president Trump had the side of the Israelis, that he wasn’t an honest broker. What would President Biden need to do to gain the confidence of the Palestinian people?
Shawwa: Listening to the Palestinians, listening to the leadership, to trust that what they tell him, [and] not just if they tell him anything, [and] just you know, kind of wipe it off like if it didn’t happen. I would say also [that] we have a long history and there are certain things that we were getting close to have a peace treaty with Israel, and then suddenly things will go dramatically wrong. I think also his administration, they need to look, because of his statement that he wants peace in the region. He wants peace with Israel between the Palestinian. So, he should, I think, look exactly where there was the real dispute to make it happen and [then] it’ll be a success story in his presidency, which I think is [a] very important presidency at this time.
The whole world now is looking, not just Palestinians, [but] China, Japan, Europe, [and] so many other countries are looking at President Biden.
TML: If the US Embassy is to remain in Jerusalem, and there’s no talk of moving it, can the Palestinian leadership still move forward?
Shawwa: I don’t think so. There has to be something that has to do with the American Embassy. This American Embassy is for Israel, so it’s not for Palestine. So, there has to be something, and I think it’s very important
TML: If it doesn’t [occur], what happens next?
Shawwa: It’s going to put us in a dilemma again. Like I remember when President Trump started pushing on the Palestinians, there was a decision not to deal with the Consulate in east Jerusalem. So, I hope not to see [this]. I don’t look forward to see[ing] that. What I look for is to have some kind of a balance in the relationship. That’s what all of us expect from President Biden.
TML: Governor Shawwa, you trained in the United States. You studied there. Did it help shape how you see things here in the Palestinian Territories? Did it change the way that you ran banks? Did it make you look at dilemmas differently?
Shawwa: I would say yes, and I learned several things. One of it is [that] you are a number that you have to build your credibility. Don’t count on your heritage only. Heritage is very important. I’m coming from a family who has a heritage, but that’s good, but if you want to be something you have to build your credit, like the credit registry.
The other thing is, you always have to go the short way. This is, this is to be honest and go a straight line. It’s the shortest way of getting to things. I remember I grew up with numbers, so I always have to think, and when my brain has to function differently, but at least I would say I also learn how to present myself and my people while I was in the US. I also learned over there how to talk to people. The most important thing is [that] you need to transfer what knowledge you have to use, so you understand it so that you can write about it or make an interview. It’s very important.
TML: It’s 2021. Where are you going? What’s your next move?
Shawwa: The sky is the limit.
TML: Governor Azzam Shawwa, thank you very much for taking this time. It was enlightening, and I hope educational.
Shawwa: Thank you! Thank you very much!
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