5 Israeli Pounds (Israel's Independence) – Israel

In 1963, Israel's currency, the lira (often called the Israeli pound or IL), was in a period of relative but fragile stability under a fixed exchange rate regime. The currency was pegged to a basket of foreign currencies, heavily weighted toward the British pound sterling, at a rate of IL 3 per US dollar. This stability, however, was largely artificial and maintained through stringent government controls. The Bank of Israel enforced a complex system of foreign currency regulations, limiting the amount of money citizens and businesses could exchange or transfer abroad, a necessity to protect the nation's modest foreign currency reserves and manage a persistent trade deficit.

This controlled environment masked underlying economic strains. The young state was still heavily reliant on capital imports, including foreign aid, loans, and reparations from Germany, to finance its rapid development and absorb large waves of immigration. The economy was characterized by a substantial public sector, high inflation by Western standards, and a balance of payments that was chronically in deficit. The fixed exchange rate, therefore, was not a reflection of natural market strength but a managed tool to provide predictability for planning and to curb inflationary pressures from imported goods.

The situation in 1963 represented a calm before a period of significant monetary adjustment. The pressures building beneath the surface of control would become increasingly difficult to contain. Within a few years, the strain would lead to a major devaluation in 1967 (to IL 3.5 per dollar) and the eventual abandonment of the sterling peg, marking the beginning of a long era of currency depreciation and high inflation that would only be decisively addressed with the economic stabilization plan of 1985 and the introduction of the new shekel.