WASHINGTON (Aug. 22)
Israel’s devaluation was seen today by American officials as being primarily a means to maintain and possibly bolster its trade position in the U.S. and other countries. An International Monetary Fund spokesman, however, told the Jewish Telegraphic Agency that the Israeli devaluation was mainly directed at Israel’s domestic economy noting that the Israeli government today had increased domestic prices of commodities at an average of 15 percent. The IMF officially announced near midnight last night that it had concurred with the Israeli monetary move. Israel was seen as having problems both in its balance of payments and in inflation in its domestic economy similar to those in the U.S. which caused President Nixon to adopt a new economic policy. Both U.S. and foreign officials refrained from speculating on the outcome of the Israeli measure which stems directly from the Nixon policy.
The Americans pointed out that the result will depend on where the dollar settles after the world monetary exchanges reopen tomorrow. Most currencies probably will be revaluated upward in relation to the dollar, the U.S. Treasury spokesman pointed out. A devaluation such as Israel has made will mean Israeli goods will be cheaper in the American market and other foreign goods in relation to them will be more expensive. This will help enable Israel to maintain its price levels and competitive position in the American market. Israeli goods also will probably have a competitive advantage in other countries which use dollars to pay for American goods, he said. Both the U.S. State and Treasury Departments spokesmen again vigorously denied that Nixon’s new economic policy restricts fundraising for Israel in the U.S. through the sale of Israel Bonds and private contributions. Capital flow from the U.S. to countries abroad is not restricted by the policy they said. Indirectly, however, the flow of funds to Israel might be affected since a weaker American economy would presumably reduce sales of Bonds and contributions.
The spokesmen, however, took a positive view, saying that Nixon’s action would result in an improved American economy and thus provide a better market for Israeli goods and greater fundraising prospects. The spokesmen at both departments also said that no decisions have yet been taken on the President’s order to cut foreign military and economic assistance by 10 percent. Funds for foreign aid for the 1971 fiscal year budget, which was closed out June 30, are not affected, he said. The new economic and military aid budget for fiscal 1972 totaling $3.2 billion, has been adopted by the House of Representatives. The Bill is now in the Senate Foreign Relations Committee. Congress is in recess until Sept. 8. The Nixon Administration’s decision on how to put the 10 percent reduction into effect-by an overall world wide cut, regionally or country by country-probably will not be taken until after Congress decides on the new aid budget appropriations, the officials predicted.