The stringent economic measures introduced 11 months ago by the Israel Government in an attempt to halt the inflation and cut the cost of living have almost served their purpose, Finance Minister Levi Eshkol today told the Knesset.
In a review of the government’s fiscal policies since last February, Mr. Eshkol pointed out that the national budget would be balanced and that prices would not rise further before the completion of the current fiscal year, at the end of March, He predicted that the price index would rise another 20 points during the coming year, as compared to an 80-point jump during the present fiscal year.
The Minister said that in the face of soaring prices the government’s aim of balancing the budget without new inflationary measures was handicapped by its need to subsidize essential foodstuffs. This has been achieved and the price of essential foods is lower in Israel than in most European countries, he noted, but he warned that it was problematical how much longer the government could continue to subsidize prices
Mr. Eshkol said that the government had spent 20,000,000 pounds on such subsidies and that the figure had been kept so low only because the government had given the fund-raising institutions, such as the Jewish Agency and the Israel bond organization, the lowest possible exchange rates for the foreign currency which they brought into the country.
However, he emphasized, the fund-raising agencies are insisting upon a better exchange rate and if this is granted the government will be compelled to pay out some 60,000,000 pounds in subsidies. The Cabinet will be forced to reconsider this situation at a future stage, and it is such a change which would lead to a 20-point increase in the price index, he indicated.
Parliament was also informed that the government was quite concerned about the problems of increased industrial output and the finding of suitable foreign markets for this output. It is essential that Israeli products be priced cheaply enough to compete in world markets, the Finance Minister asserted, appealing to industry and labor to cooperate to cut production costs for this purpose.
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