Israeli Government Imposes Severe Foreign Currency Restrictions

The government tonight banned Israelis from holding bank accounts abroad and imposed a series of other severe foreign currency restrictions aimed at controlling runaway inflation and reducing the country’s growing foreign trade deficit. Critics immediately denounced the moves as ineffective and unenforceable.

Foreign bank accounts must be closed within one month under the new regulations which take effect tomorrow morning. In addition, Israelis are banned from holding or dealing in foreign securities, except those of Israeli companies traded on the New York or other overseas stock exchanges. Officials here estimate that Israelis hold some $700 million worth of stocks and shares abroad.

Other measures announced tonight are a reduction from $3,000 to $2,000 in the currency an Israeli may take on a trip abroad; a ban on dealing in gold which applies to Israelis and foreign nationals who use money in Israel for such dealings; a drastic reductionin the amount of assets that Israelis who emigrate may take with them.

Yosef Sarig, Controller of Foreign Currency at the Bank of Israel, told a radio interviewer tonight that he was not prepared to say that additional restrictions will not be applied. His remarks caused widespread concern over Dollar deposit accounts.

HOPE TO NARROW BALANCE OF PAYMENTS DEFICIT

Government officials said the new measures would help narrow the balance of payments deficit by decreasing the amount of hard currency Israelis can spend abroad.

But a leading economist, Prof. Assa Razin, a former adviser to the government said tonight that the restrictions would make “no meaningful difference” to the trade balance. He said most of the measures could not be enforced and predicted that people would circumvent them by recourse to the black market.

“This is just of nuisance value. It will increase the public’s nervousness, but little else,” Razin said. He criticized the government for its “incapability of cutting its own budget meaningfully.”

Labor MK Gad Yaacobi, also an economist, said the new currency measures were a final, belated clearing of the “last ruins of the so-called economic revolution” instituted by the Likud government when it was first voted into office in 1977.

At that time, the government rescinded all foreign currency controls. Some were recently reimposed. But the measures announced tonight are a total reversal of Likud’s orginal commitment to laissez-faire economics.

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