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Defense Costs Pose Financial Crisis for Israel, Pincus Warns UJA

The chairman of the Jewish Agency warned here today that Israel faces “a financial crisis of the greatest magnitude” as a result of the outflow of its dollar reserves for defense purposes. Louis A, Pincus told the banquet session preceding the annual national conference of the United Jewish Appeal that Israel’s social welfare and educational programs were threatened.

He said the country’s “unprecedented defense expenditures” were 50 times greater than in 1951 and more than two-and-a-half times as much as in 1967, the year of the Six-Day War. He said defense costs absorbed 80 percent of Israel’s current annual tax revenue, resulting in serious inflationary pressures.

The defense expenditures also result “in a seriously unfavorable balance of trade, a drain on the foreign currency reserve which is down to the breaking point,” Mr. Pincus said. On the other hand, he noted that Israel’s economy “achieved new heights,” its gross national product has gained 11-12 percent each year and its exports have grown from $50 million in 1948 to over a billion dollars anticipated in 1970. But, he added, “our imports in that year will be some $2.4 billion.”

As a result, he said, “our foreign currency reserve is down to $442 million, $58 million below the $500 million figure which all economists agree is dangerously low.” Mr. Pincus warned that Israel faces a further inflationary cycle stemming from the needs of 40,000 new immigrants who will have arrived by the end of this year and 60,000 newcomers expected next year.

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