Israel’s Zooming Defense, Absorption Costs Worsened by Inflation, Sapir Says

The tremendous burden of defense expenditures, inflation and the sky-rocketing cost of absorbing new immigrants constitute the three major fiscal problems facing Israel in 1970, according to Pinhas Sapir, former Minister of Finance and probable Finance Minister-designate in the as yet unformed new Israeli government. Mr. Sapir expounded on those problems in an interview to be published here tomorrow in the Jewish Observer and Middle East Review.

He said the most serious problem was the outflow of dollars for defense needs. In 1970, he disclosed, defense will cost 50 to 60 more times as many dollars as it did in 1951 and that is one reason why Israel has been unable to narrow the gap between its imports and exports. Mr. Sapir said that Israeli exports now amounted to $1.5 billion a year, a “gigantic” advance for the country. But imports, mainly for defense purposes, consume $2.4 billion and private imports of such items as irrigation pipes, ships, aircraft and more modern automobiles cost $200-$250 million, he said.

He said defense expenditures in Israeli currency make for inflationary pressures which have to be remedied by raising taxes and trying to save on many items. Mr. Sapir said the problem is not only financial but involves the preservation of Israel’s existence. In the latter category is the need for immigrants. In 1969, he said, immigration will reach 40,000 and next year 50,000 to 60,000 newcomers are expected. But the cost of absorbing a single immigrant family from Western countries costs five times what it once cost to absorb families from North Africa, Yemen and Iraq. Mr. Sapir said that the contributions of world Jewry to Israel, while very high, especially in 1967, will not be sufficient for 1970 and the years beyond.