Calm, marked the opening of Israel’s business week today as the country faced the fact that, over the Sabbath weekend, the Israeli pound has been devalued.
Levi Eshkol, Minister of Finance, announced the devaluation in a country-wide radio broadcast Friday afternoon, after all business had ceased for the Sabbath but just before sundown ushered in the official day of rest. Under the new economic policy announced by Mr. Eshkol, the Israeli currency was pegged to three pounds for a dollar. The old official rate was 1.8 Israeli pounds to the dollar. The step had been taken by the Government to boost trade, narrow the trade gap between imports and exports, meet the challenge of the European Common Market, and halt domestic inflation.
Today, throughout the country, business continued as usual, commodity prices as a whole remained stable, and there was no rush of buyers. Mr. Eshkol told the Jewish Telegraphic Agency this morning that the trend is “a welcome sign, testifying to the population’s maturity.” He expressed the hope that the trend will continue.
A brief survey of Sunday’s markets, here and at Tel Aviv, revealed the public reaction as quiet. The Stock Exchange at Tel Aviv opened as usual, bank transactions were normal, and there were no special demands for withdrawal of deposits. However, a large variety of commodities were marked at higher prices, including gasoline, heavy oils, automobiles, coffee, tea, cocoa, hides and leather, chemicals, metals and imported books.
Smaller increases were marked on refrigerators and cotton. Tickets for sea and air transportation were up 20 percent. There were no increases on consumer staples like sugar, edible fats, bread, eggs, milk and other agricultural products. Cooking gas and electricity remained at pre-devaluation prices, as did the postal services and tickets for domestic transportation services like buses and railroads.
MANUFACTURERS ASSOCIATION AGREES TO VOLUNTARY PRICE FREEZE
Today’s regular, weekly meeting of the Cabinet here was devoted entirely to discussions of the new economic policy. The Cabinet authorized Mr. Eshkol to explain the new policy to the Knesset (Parliament) tomorrow. The Cabinet meeting was attended by David Horowitz, Governor of the State Bank, as well as by senior officials of the Treasury Department. The Cabinet decided to appoint a committee of senior officials of the various Ministries to coordinate the details of the Government’s new economic policy.
Pinhas Sapir, Minister of Commerce and Industry, announced today that the Israel Manufacturers Association has agreed to call on all its members to implement a voluntary price freeze. He said he had obtained similar pledges from cooperatives, consumer societies and the Merchants’ Association.
The director-general of Israel’s Treasury declared that he expects prices to rise three or four percent “at most.” Some articles popular among consumers will not increase in price at all, he said. Price increases, he stated, will be determined chiefly by the increased cost of the “import component.” New import prices, he said, could increase local costs by not more than four percent. The price of luxury goods, imported at a high tax ex-exchange, will increase by the difference in the exchange rate, the Treasury official said.
The general policy will be to cancel import duties on machinery, equipment and most raw materials, which ranged up to 45 percent. Among materials to be freed from import taxes are chemicals, unfinished metals, raw fibers and pigments.
In an address to Israeli newspaper editors today, Mr. Eshkol said the Government will not hesitate invoking price controls if there should develop any signs of profiteering. He said the Government still has the possibility of helping industries during a specified time, until it is proven that an enterprise is economically viable.
“If a foreign investor proposed something very exciting for a development area,” he said, “he may get special conditions for a certain time.” He hinted that special consideration might be given to “hardship cases” like industries that floated dollar-linked loans recently. The same, he said, might be applied to housing investors that took out dollar-linked mortgages.
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