Israeli Government Wavering in Its Policy of Devaluation

The government appears to be wavering in its policy of devaluation which has triggered mass buying of foreign currency by the public before the Shekel is reduced still further.

The Ministerial Economic Committee, at an unusual nighttime meeting last night decided not to devalue the Shekel again at this time. It was devalued once already this month and once last month vis-a-vis the U.S. Dollar and European currencies. The aim is to ease the burden of Israel’s foreign debt and to make Israeli products more saleable abroad.

But Finance Minister Yoram Aridor said on a television interview last night that his policy called for gradual devaluation in line with cost-of-living increases rather than a one-time large devaluation. Economic observers said today that Aridor may be forced to change his mind because the skeptical public believes a new major devaluation is imminent and is accumulating foreign currency before it becomes too expensive.

The Ministerial Economic Committee reaffirmed its resolve to proceed with the outgoing government’s austerity program. Its goal is to prune $1 billion from the national budget but no practical measures are likely until a new government takes office.

Meanwhile, rising sentiment was reported in Likud ranks today to dump Aridor when the new Cabinet is formed. Maariv reported however that Premier-designate Yitzhak Shamir is resolved to give the Finance Minister “another chance” to execute an economic austerity program that would remove the country from the brink of economic disaster.

Aridor has been unable to achieve much so far, chiefly because each coalition partner is pressing demands regardless of the overall situation. Tami and the Aguda Israel are just two examples. The former, whose constituency is largely among impoverished Sephardim, is demanding tax cuts and increased aid to the poor. The Orthodox Aguda demands even higher government subventions for religious schools.