Predict Severe Measures to Cope with Israel’s Drop in Foreign Currency Reserves

Severe measures by the Government to combat Israel’s foreign currency crisis were predicted here today following disclosure that the country’s foreign currency reserves dropped last month to $510 million which many economists consider to be the danger point.

David Horowitz, governor of the Bank of Israel, said on a television interview yesterday that Israel will seek $90 million in “soft loans” from the International Monetary Fund as a first measure, but added that drastic steps must be taken to curb runaway private consumption. A “soft loan” is a loan at less than commercial rates over a longer period.

Mr. Horowitz said that private consumption in Israel has gotten “completely out of hand” in comparison with other countries but did not specify the measures that might be taken to curb it. Israeli newspapers predicted today that the Government would sharply increase the sales tax and taxes on travel abroad. These measures would affect mainly foreign-made goods and would reduce the amount of currency in circulation. Anticipation of Government measures to curb private spending has already set off a wave of buying, mainly of hard goods such as television sets and cars.

NEXT STORY