The Cabinet last night ordered a freeze on the volume of credit extended by Israeli banks at $900 million, the figure it is expected to reach this Thursday. The measure was taken to combat inflation. Since the Israeli pound was devalued last Aug. banks have been permitted to increase their credit volume by one quarter of one percent each week. During the ten weeks since devaluation, the total credit volume increased by only 2.5 percent.
The Cabinet acted on the recommendation of Finance Minister Pinhas Sapir who was supported by David Horowitz, retiring Governor of the Bank of Israel and his recently appointed successor. Moshe Zanbar. Sapir reviewed the country’s economic performance during the year. He noted on the positive side that industrial production rose by 13.5 percent, much more than expected. Private consumption per capita hardly rose at all during the first six months of this year and the additional money in circulation is due entirely to public spending and investment.
Sapir said the record indicated greater success than expected in efforts to halt inflationary pressures. On the negative side, the Finance Minister observed that the economy is over-extended and is short 30,000 workers. Construction has taken up the biggest share of investments–$750 million–matching the peak volume of 1964-65. He said that Israeli exports would amount to $1.750 billion this year against slightly more than $3 billion in imports. If investment goods, mainly ships and aircraft, are deducted, imports will hardly have increased at all in 1971, he said.
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