The government’s economic policies came under sharp attack over the weekend by both trade union and business leaders and Moshe Mandelbaum, Governor of the Bank of Israel.
The attacks coincided with the visit here of an International Monetary Fund (IMF) delegation for consultations. It was greeted with news that the country’s foreign currency reserves have dropped by another $135 million, lowering them rapidly to the $2 billion “red line”, the danger point below which the economy would be in dire peril.
Bank of Israel experts expressed concern today that the danger point might be reached by the end of this month, seven months before the new American economic aid package reaches Israel.
PUMPING SHEKELS INTO THE ECONOMY
The government, meanwhile, is continuing to pump record amounts of Shekels into the economy in order to meet its commitments. So far the Cabinet has been unable to agree on further budget cuts and as a result has been forced to reduce its support of subsidized products forcing up their price. It is also raising taxes and allowing the price of unsubsidized products to rise.
Those were some of the measures assailed by Mandelbaum who heads the nation’s central bank. He said at a press conference today that price rises in excess of those agreed to when the second economic package deal took effect in January, would revive galloping inflation. Israel Kessar, Secretary General of Histadrut, warned that the trade union federation might take legal action against the government for breaching the eight-month wage-price freeze agreement. He said that according to the deal, prices could be raised by a maximum of only five percent.
Dr. Emanuel Sharon, Director General of the Treasury, promptly telephoned Kessar with a promise to cancel some recent price rises if Histadrut could prove they violated the agreement.
The President of the Union of Chambers of Commerce said at the same press conference addressed by Mandelbaum that the government’s tax policy was distorting every facet of economic activity in the country. As a result, he said, it is no surprise that tax evasion has become the accepted social norm. Israel bears the heaviest tax burden in the world, he declared.
Meanwhile, Likud MK Uriel Lin, former Director of State Revenues, called on the government for a five year moratorium on new taxes. He proposed the period be used to institute tax reforms.
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