The Cabinet decided to shave $57 million off Israel’s record $3.5 billion national budget today as the country’s financial watchdogs warned of a seriously deteriorating economic situation. The two percent reduction is not likely to affect defense outlays. A nine-man ministerial committee headed by Agriculture Minister Haim Gvati was appointed to decide where the cuts should be made, David Horovitz, Governor of the Bank of Israel, told the Knesset Finance Committee Friday that the economic situation was “grave.” He repeated the warning in a radio interview yesterday. Mr. Horovitz cited the 60 percent increase in the country’s balance of payments deficit during the first quarter of the year following a serious decline in foreign currency reserves during 1969. He said the situation could be remedied if the government maintained “a consistent monetary and fiscal policy.” The Treasury is reportedly considering cuts in Israel’s record budget for the current year. Mr. Horovitz said the national debt is of such proportions that “every baby in Israel owes $1000 on the day of its birth.” Hebrew University economists warned in a radio interview yesterday that the present slump on the New York Stock Market might have adverse affects on the United Jewish Appeal and Israel Bond income for the current year. The economists said Israel’s foreign currency reserves have begun a slow rise after hitting a dangerous low at the end of last year. But they warned against attaching excessive importance to this.
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