The Israel Pound was devalued two percent today which means that the U.S. dollar is now worth IL 6.24. It was the second two percent devaluation since June 17 when a special ministerial committee was given the authority to devalue the Pound two percent every 30 days.
Israelis had expected the devaluation and many feared it would be as high as 10 percent. Importers earlier this week were making a special effort to obtain foreign currency needed to clear goods from customs, and people who expect to travel abroad were trying to get foreign money earlier than they would otherwise need it. In addition, there was a rush for dollar-linked bonds on the Israeli Stock Exchange, pushing up their prices. Today’s announcement was seen as a measure against speculators who anticipated a larger devaluation.
There was some opposition to the devaluation from both manufacturers and the Histadrut. The Ministry of Finance said it expected the two percent devaluation to be absorbed by industry. But Avraham Shavit, president of the Manufacturers Association, said manufacturers cannot absorb it because they have to pay a high cost-of-living bonus to employes, and because of the previous devaluation. He said there was no way to evade a price hike on many items.
IMPORTED GOODS PRICES TO CLIMB
Yeruham Meshel, secretary general of the Histadrut, took the government to task for not consulting the labor federation before deciding on the devaluation. However, he said he was satisfied that it would not affect the price of essential commodities including fuel.
The first to feel the effect of the devaluation were airline passengers who were told they had to add two percent on their already-bought tickets and the equivalent increase on the travel tax. Imported goods are expected to go up, too–IL 500 to IL2500 more for a stereo set, IL 100 for washing machines, IL 1000 for televisions, and cars are expected to cost several thousand Pounds more.
Meanwhile, financial circles expect another and even larger devaluation soon. Anything above two percent needs the approval of the entire Cabinet. Economists have been stressing that a two percent devaluation will not be effective and a five or six percent devaluation at least is needed. Financial sources noted that the two devaluations were caused by the strengthening of the dollar which is continuing to go up. (By Yitzhak Shargil)
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.
