Inflation in Palestine is Jeopardizing Country’s Economic Development

Palestine economic circles are closely following the trade talks with Egypt, which opened here last week, in the hope that they will lead to the first concrete measures against the inflation which is jeopardizing the entire future of Palestine industry.

The chief interest here centers primarily on the possibility of immediate alleviation of Palestine’s supply situation rather than markets for the local industrial production, which has multiplied two and a half times since the outbreak of the war. There is, however, realization of the fact that the country will be unable to compete in foreign markets unless the present extremely high production costs are sharply reduced to the level prevailing in other industrial exporting countries.

The principal factor in the high production costs is the inflation, which is manifest in every aspect of the country’s life, resulting in a cost of living at least double that of Britain, according to official statistics, and actually three to four times Palestine’s pre-war level, according to labor economists here. The extent of this inflation is shown by the almost six-fold increase in currency circulation since 1939 and the doubling of bank deposits. At the same time there has been a radical decrease in available supplies to the point where the average worker is unable to maintain nutrition standards.

Up to the present, efforts to combat the inflation and reduce the cost of living have proven almost universally unsuccessful, and only this week the official cost-of-living scale was boosted another three points. Economists here argue that the only possibility of starting a price deflation cycle would be to import moderate quantities of consumer supplies. It had been hoped that these would come from Egypt. Egypt similarly requires manufactured goods, which its own infant industries are unable to provide and are unobtainable from pre-war sources. The original intention of the Egyptian Government, when it broached the proposal to the Palestine Government for the talks which opened here, was to offer foodstuffs in exchange for manufactured goods.

Since the talks were scheduled, however, the extent of the epidemic in upper Egypt, where a combination of malnutrition and malaria is taking thousands of lives, requires a diversion of considerable foodstuffs for the affected areas. This, it is believed, may make impossible food shipments to Palestine. The possibilities of reciprocity between the two countries, with each complementing the other’s needs, were stressed at a luncheon the Palestine administration tendered today to the Egyptian mission. High Commissioner Sir Harold A. MacMicheal stressed that the days of self-sufficiency were gone and that all countries were now interdependent. Palestine wanted food and raw materials from Egypt, he said, pointing out that industry could not be kept going on oranges and potash.