Tens of thousands of Israelis today gathered outside banks in long queues to exchange their currency for the new bills which became legal tender at noon today. The banks halted all transactions except the exchange of currency in a 48-hour bank “holiday” which ends tomorrow night. All other business continued in orderly fashion with payment being made by check or by one pound bills and change.
The exchange was ordered in a surprise move announced last night by Finance Minister Eliezer Kaplan who revealed that the government would set aside ten percent of all sums on deposit over 50 pounds or all notes larger than one pound as part of a compulsory national loan by which the government hopes to raise 25,000,000 pounds towards its development budget and to stabilize its currency. Certificates will be issued for the withheld portion and the loan, maturing in 15 years, will bear four percent interest. The Finance Minister also disclosed that the government will soon submit to Parliament a bill aimed at forcing property owners to contribute to the compulsory loan.
Mr. Kaplan is scheduled to make a statement in the Knesset tomorrow on the compulsory loan and the exchange of currency. Meanwhile, political leaders seem confused by the development and are awaiting the Minister’s statement, after which a full-scale debate will begin in Parliament. The Knesset praesidium has appealed to the government not to delay submission of the bill to include property owners in the compulsory loan so that all sections of the population may be involved equally.
PUBLIC PUZZLED; GOVERNMENT ORDER PROVOKES FEW COMPLAINTS
Both political leaders and the general public seem to be equally puzzled by the government’s action, but it has caused far less complaint than might have been anticipated. More than one wag was heard to exclaim today: “Thank God, I have no money.”
When he announced the exchange order at a press conference last night, Mr. Kaplan estimated that there might be as much as 170,000,000 pounds of currency in circulation in Israel, but the Minister said that the government would not be sure until it had all been turned in. The process of exchanging the bills will take two weeks, after which the old currency will cease to have any value.
Since it is illegal to take Israeli currency abroad except in one pound notes or less, Israeli consuls abroad have been instructed to exchange only coins and bills up to one pound in denomination. Larger bills are assumed to have been smuggled out of the country and are considered void.
“We recognize the seriousness of the measures we have just adopted,” Mr. Kaplan told the press conference, “but we see their necessity for the stabilization of our currency.” He pointed out that although the current year’s regular budget is balanced, the government needs more money to meet its development budget and has decided not to issue more banknotes or securities to cover either the development or the defense budgets. He emphasized that the government expects all citizens to make sacrifices, if necessary, to help insure the country’s economic independence.
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