Government sources said today that Israel faces no difficulties obtaining credit from foreign banks despite the precarious state of its economy. Moreover, since the United States has indicated it will increase economic aid, Israel’s position in the monetary market should improve, the sources said.
Those optimistic forecasts coincided with reports here today that Israel’s foreign currency reserves reached an all time low of $2.7 billion last month and that the economic policies of Finance Minister Yigal Cohen-Orgad, who took office less than two months ago, have come under scathing criticism by Bank of Israel Governor Moshe Mandelbaum.
There was no hard data on the depletion of foreign currency reserves in November. Estimates range between $70-90 million. Since last April, however, the country’s reserves of foreign currency dwindled in the amount of $450 million. The trend is continuing but at a slower pace.
Financial sources pointed out that whatever the drop in November, it was less than the $176 million decline in October. October was the month that saw thousands of Israelis cash in their index-linked bank securities to purchase foreign currencies, mainly U.S. Dollars, in anticipation of a major new devaluation of the Shekel.
ECONOMIC POLICIES CRITICIZED
The tide was stemmed when the government banned most foreign currency transactions on November 12. But Mandelbaum, who heads the central bank, Israel’s equivalent of the U.S. Federal Reserve, contended that Cohen-Orgad’s economic policies amounted to “shots in the dark”, a charge the new finance minister had frequently leveled against his predecessor, Yoram Aridor.
Mandelbaum, speaking at a closed meeting of bank experts, said the only way to deal with the economic crisis was to reach an agreement between labor, management and government on a wage-price freeze. He said the time is ripe for such a move because the alternative — abolishing the system of linking prices and wages to inflation — is impossible at the present three digit inflation rate.
Others attending the meeting said the 23 percent devaluation of the Shekel in October was a wasted move because the government should have cut its budget before introducing devaluation. Maariv reported today that Finance Minister Cohen-Orgad recently rejected a proposal to further devaluate the Shekel.
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