The devaluation of the Israel pound on a par with the British pound sterling at $2.80 last night had no effect on Israel’s financial life today. All banks and financial institutions in this country remained open for business today without the slightest sign of panic.
The devaluation was announced last night by Finance Minister Eliezer Kaplan at a hastily summoned press conference, following the announcement in London of the drop in the British currency. Mr. Kaplan said that Israel’s action was a direct consequence of the British move and that parity would be maintained between the two currencies. He stated that since most of Israel’s imports are from the dollar area, the devaluation will not influence Israel’s price structure and that all government price regulations will remain unchanged and in effect.
A spokesman for the Foreign Ministry’s Economic Division declared today that the majority of trade pacts between Israel and foreign countries are based on payments in dollar currency and that as a result of the world devaluation of sterling currency Israel’s economic position would be strengthened. Production will be increased and industry will be consolidated, he said. He also announced that no trade agreement had yet been signed with Britain, and that the reduced value of the pound will not upset Israel’s foreign trade.
BUSINESS CIRCLES SEE IMPROVED ISRAEL POSITION IN DEVALUATION
In trade circles in Tel Aviv it was pointed out that Israel will now be able to purchase goods more cheaply in areas outside the dollar area because it pays mostly in dollars. One competent source stated that the equalization of the British and Israel pound will benefit the Jewish state because it will eliminate the confusion which existed in an Israel pound of two values–$4.00 in relation to all currencies except dollars, and $3.00 in relation to U.S. imports.
Dr. Aron Barth, director of the Anglo-Palestine Bank, Israel’s largest financial institution in the country and only bank of issue, said that the six percent drop in value of the Israel pound is unlikely either to influence prices or trade calculations in this country, particularly since American prices are now dropping to an even greater extent. He added that the price of British goods entering Israel will remain unchanged while the drop in value of the Israel pound will be compensated for by a larger volume of exports.
Arieh Shenkar, head of the Manufacturers Association of Israel, took a dim view of the new situation. He expressed concern over additional competition for Israel’s industry from Britain’s factories. He said that British exports are bound to increase to a considerable extent as a result of the lower wages paid to British workers in the form of a devalued pound.
In various economic circles it was stated that because of the austerity program introduced by Dr. Dov Joseph, Minister for Rationing and Supply, which has already lowered prices and frozen them at the lower levels, Israel’s economy is now in a healthy state. The devaluation will further improve this situation, and to even a greater extent than in other countries where devaluation has taken place, it was asserted.
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