JERUSALEM (May. 21)
Israel’s Foreign currency reserves stood at a record high of $4.4 billion at the end of last month and may soar to an unprecedented level of $6 billion by the end of the year. But according to Treasury and Bank of Israel sources, this is not necessarily a welcome development, The Jerusalem Post reported Wednesday.
The problem according to the sources, is that Israel is paying interest on loans higher than what it is earning on its currency reserves and the possibility that Israel can retire its foreign debts ahead of schedule is limited. Israel’s major creditor is the United States, where the law prohibits early payment of debts in many cases.
The foreign currency bonanza is attributable to the heavy influx of foreign currencies, mainly Dollars into the country by the private sector since the sharp devaluation of the Shekel last January. The stream of Dollars buying up cheap Shekels continues, the report said.
In addition, Israel received American economic aid for the 1987-88 fiscal year of $1.2 billion in one lump sum last October.