Dr. Moshe Mandelbaum, Governor of the Bank of Israel, has warned the government that the fight against inflation must be its first economic priority.
In his periodic report submitted to the government last Thursday, he made it clear that whenever the money supply exceeds a certain limit, gallopping inflation is the result. Inflation in Israel is currently running at well over 100 percent and, according to Mandelbaum, this poses an immediate danger to the economy despite the recent improvement in Israel’s balance of payments.
The narrowing of the payments gap is the result of improved overseas markets rather than government policy, Mandelbaum’s report said. He said the government’s contribution to that improvement was cancelled out by the soaring inflation rate. He urged that the Treasury deal with both problems simultaneously, but mainly act more vigorously to reduce inflation.
The Bank of Israel chief recommended greater efficiency in collecting taxes from companies to decrease the budget deficit. He also recommended that the Treasury act to maintain the stability of private savings plans and called for a package agreement between Histadrut and the manufacturers to freeze prices and wages.
Mandelbaum’s recommendations are not mandatory on the government, however, and most observers doubt that they will be implemented in the period before the July 23 elections.
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