David Horowitz, Governor of the Bank of Israel, criticized the Government today for its “exaggerated” encouragement of investments and called for an economic policy of consolidation rather than expansion. Mr. Horowitz commented on the Government’s economic policy in a report to the Cabinet and the Finance Committee of the Knesset, Israel’s Parliament.
The bank official’s report was issued today in accordance with a regulation in the charter of the Bank of Israel which requires the governor to submit a report on the causes of monetary expansion if it exceeds 15 per cent within any 12-month period. Since the beginning of this year, currency in circulation has already increased by 17.6 per cent to a total of 1,140,000,000 pounds ($380,000,000), the report stated.
Recommending a slowdown in economic activity and reduction of investments, Mr. Horowitz pointed out that there are no unemployed productive factors in the country. An exaggerated encouragement of investments would only lead to further inflation but not to economic expansion, he warned.
Mr. Horowitz’s recommendations call for further raising of the Bank’s liquidity in order to cut down on credits and also to insure that the funds of the recently adopted compulsory loan will not be injected into the economy, but will be frozen. The funds from the Development Budget, he said, should be used to strengthen existing firms and provide working capital.
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