JERUSALEM (Nov. 24)
Government officials said today that the latest devaluation of the Pound will not set off a new round of price hikes for food and public transportation. But price stability is expected to be short-lived because of planned massive cuts in the government’s subsidies of basic food products and transportation.
The Pound was reduced by 1.5 percent at midnight last night and now stands at IL 7.10-$1–ten agorot less than it was one month ago. It was the fourth instance this year of the so-called “creeping devaluation” which permits the government to depreciate the Pound by up to 2 percent every 30 days if necessary. Last Sept. 28 the Pound was devalued by 10 percent in an effort to conserve the nation’s dwindling foreign currency reserves and stimulate exports.
There was no massive run on the banks or widespread hoarding at that time because the prices of basic commodities and services were held firm by government subsidies But the Cabinet is due shortly to consider recommendations by the ministerial economic committee for an IL 1.5 billion out in the government’s present IL 4 billion subsidy program.
Finance Minister Yehoshua Rabinowitz has warned that the national budget for the next fiscal year must not exceed IL 86 billion. This is more than IL 6 billion less than the total budgets sub mitted by the various ministries which exceed IL 92 billion, Rabinowitz insists that drastic cuts will have to be made and a reduction of government price supports is one measure that is considered inevitable.
In practical terms it will mean a 40 percent rise in the price of basic commodities, a 30 percent rise in public transportation faros and a 30 percent increase in the prices of meat and poultry, A standard loaf of bread that now costs IL 85 will go up to IL 1,20; a liter of milk selling for IL 1,60 will cost IL 2,25; chicken will rise in price from IL 10 to IL,12 per kilo; and a Tel Aviv-Jerusalem bus ticket will go up from IL 9.50 to IL 12.50.