Israel Cabinet Adopts Alleviation Measures on Devaluation Effects

Israel’s Cabinet devoted its regular, weekly meeting today to discussions revolving around the new economic policy, following last week’s devaluation of the Israeli pound. The Cabinet approved in principle a series of steps to help alleviate the situation that has resulted from the pound devaluation, and empowered a Ministerial committee to work out the details of the policy, which will be presented to the Knesset (Parliament) tomorrow.

Some of the recommendations are intended to ease the burden of mortgages whose indebtedness, linked to dollar loans, has increased 67 percent. Under the devaluation policy, the Israeli currency, which used to be worth 1.8 pounds to the dollar, is now valued at three pounds to the dollar.

Mortgagees owing loans on apartment buildings or low-cost housing are to be given several choices for relief, including conversion of the dollar-link to the cost-of-living index linked retroactively to the date of issuance of the loan, or three months’ grace to repay existing mortgages fully or partly at the pre-devaluation rate, or time extension for repayment of the mortgages at the new rate. Additionally, mortgagees would be given an extra one-third period in which to repay their indebtedness, so that a mortgage repayable in six years will not fall due until eight years.

Other recommendations include relief to be extended to farmers who have loans or mortgages from development funds which have been dollar-linked until now. Meanwhile, the devaluation-sparked economic upheaval appeared to be stabilizing today. Prices appeared to have stopped the upward surge touched off by the currency devaluation.

MANUFACTURERS REACH AGREEMENT WITH GOVT, ON PRICES

David Horowitz, Governor of the State Bank of Israel, was reported to have suggested that the Government issue short-term, cost-of-living, index-linked securities as a replacement for dollar-linked securities, as one way to absorb the excess spendable money. Another suggestion was to increase the interest on foreign currency deposits to about nine or ten percent.

Manufacturers reached an agreement with the Government, under which no surcharge duties will be levied on raw materials, and the manufacturers agreed to maintain existing prices as long as stocks bought at pre-devaluation prices remain available.

Gift parcels from abroad are now subject to higher taxation, as a result of the devaluation. Under the new customs rates, the tax on foods has risen from one and a half pounds to two and a half Israeli pounds per 2.2 pounds of weight. Gift clothing taxes remain at 84 percent for wool and cotton goods, and 100 percent for silks and synthetic fibers. The used-clothing levy has gone up from 40 agora (40 percent of an Israeli pound) to a pound per 2.2 pounds of weight.