Fiscal 1971 Deficit Will Reach $1.4 Billion; Defense Budget Will Be 25 Percent of Gnp

Israel is entering the new year with a fiscal deficit expected to reach $1.4 billion before the year ends, a national debt that will reach $3.4 billion and a defense budget that will consume roughly 25 percent of its gross national product, Jacob Agmon, director general of the Finance Ministry, disclosed today. He said the deficit will be $100 million over last year’s and the national debt, $500 million more, a sum equal to the new American loan for military purchases. Agmon, a 42-year-old economics graduate of the Hebrew University, said that the budget for fiscal 1971 was based on continued full employment and relative price stability. He said the principal aims of the Finance Ministry were, in order of priority, to pay for defense needs, to ensure the continued growth of the GNP and to provide social services for low income groups and new immigrants.

Agmon said that the draft budget which Finance Minister Pinhas Sapir will present to the Knesset for approval calls for an expenditure of $3.780 billion in fiscal 1971 which starts April 1. The biggest item is defense to cost $1.925 billion. According to Agmon, Israel’s balance of trade would be less unfavorable were it not for the heavy defense outlay. He said that exports which amounted to $725 million in 1970 are reliably estimated to reach $850 million in 1971, a 17 percent rise. Except for armaments, imports will increase only about eight percent, from $1.4 billion in 1970 to $1.650 billion this year. The import figures include $120 million for the purchase of ships and aircraft, including the new jumbo jets which cost $22,5 million each. Agmon said that well over half the budget will be financed from direct and indirect taxes and about a quarter from loans and foreign currency transfers.