JERUSALEM (Aug. 29)
The Israel Government’s continued borrowing from banks is chiefly responsible for the dangerous inflationary trend in the country’s economy and only the most stringent austerity measures will be able to halt the upward spiral, David Horowitz, governor of the Israel State Bank, warned today in the latest semi-annual report of the bank.
The report, which evaluates trends in the economy through May, 1957, notes that most of the state borrowing came at the end of the Sinai campaign late in 1956. The first half of this year also saw an increased level of consumption, Mr. Horowitz declared, created by a “policy of encouraging imports for local consumption.” A corresponding increased demand for goods in the local markets favored an expansion of services and industries to meet the needs of the Israeli people at the expense of manufacturing and agriculture.
In his recommendations, Mr. Horowitz suggested that the government maintain credit restrictions, curb its own expenditures and make any further increase in personal incomes dependent upon increased productivity. He underlined that increased savings would be a deflationary factor. Finally, Mr. Horowitz urged a revision of the government’s investment policy–that it establish a list of priorities which would favor investment in enterprises which contribute more to the national product.