The Israeli economy hit a new crucial stage this week with foreign currency reserves dropping below the “red line” covering import expenses for three months. The reserves are now at $1.1 billion, which in the present market can pay for Israel’s total imports for only two months.
Bank of Israel sources described the situation as serious, and worse than some of the most pessimistic expectations at the beginning of the year. The problem is especially acute because of the delicate military balance in the area, which could cause a drop in domestic production and even a higher dependence on imports. The reserves dropped during July by $106 million, with a general drop of $500 million since the beginning of this fiscal year.
One of the explanations for this trend is the increase in speculative activities, some of them caused by rumors of a coming devaluation of the Israeli pound. The transfer of dividends abroad was made earlier than the originally scheduled date, debts were paid early, buyers prepaid for purchases abroad, and others who have rights to buy foreign currency did so for fear they might be too late. The Finance Ministry is currently making an effort to recruit money abroad, and is being forced to pay high interest rates.
The Archive of the Jewish Telegraphic Agency includes articles published from 1923 to 2008. Archive stories reflect the journalistic standards and practices of the time they were published.
