Sapir and Barlev in Dispute over Credit Freeze Proposal

A dispute is shaping up between Fiance Minister Pinhas Sapir and Commerce Minister Haim Barlev about a proposal to freeze bank credits to individuals as a means of fighting inflation.

The proposal has been made forcefully and repeatedly in recent weeks by Bank of Israel Governor Moshe Sapbar. Finally on Sunday, Sapir came round to Sanbar’s viewpoint. The Ministerial Economic Committee agreed, however, to postpone its final decision while Barlev thought out his view.

This morning Barlev informed Sapir he was opposed to the idea. The committee is due to meet Thursday to finalize its position. Sanbar has warned repeatedly that if banks continue to give credit liberally while at the same time the government, understandably on election eve, abstains from unpopular tax measures, inflation is bound to flare even more.

The credit to be frozen under Sanbar’s proposal would not be what is known as “directed” credit which is given to firms for development and export. All firms recognized by the government as productive enterprises would continue to receive working capital at 11 percent interest and credits for export at 6 percent.

But what would be frozen–if the ministers reach agreement Thursday–is regular bank credit to individuals. Banks would be forced to keep their total of loans at the level of July 18 and any loan above that level would be penalized by requiring the bank to deposit an equal sum in the Bank of Israel.

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