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Israel’s Economy on Verge of New Period of Growth

October 7, 1987
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Israel’s economy, stagnant for years, appears to be on the verge of a new period of growth. But it faces severe difficulties, indicated by figures released this week by the Central Bureau of Statistics. The country’s imports are up and so is its foreign debt while its foreign currency reserves have dipped for the second consecutive month, after a long period of rise.

During the first nine months of 1987, Israel paid some $8.25 billion for imported goods — $1.5 billion more than in the same period of 1986. The level of imports this year has been higher than in any year from 1980-85. It includes all variety of goods. But the highest rise was in the import of consumer products, up 36 percent over last year.

The Bank of Israel announced Monday that the foreign debt now stands at $25.7 billion, an increase of $693 million. Theoretically, every Israeli owes more than $5,000 in foreign debt.

Economists attributed the increase of the foreign debt to the rise in private loans taken overseas and the weakening of the U.S. Dollar against European and Japanese currencies. The Israeli Shekel is geared to the Dollar.

Meanwhile, Finance Minister Moshe Nissim has convinced a key American lawmaker, Sen Lawton Chiles (D. Fla.), chairman of the Appropriations Committee, to allow Israel to repay its U.S. debt in a manner which could save it some $150 million in interest, Maariv reported Monday.

According to the report, Chiles, after talks with Nissim in Washington last week, reversed his earlier position and agreed to early repayment of the Israeli debt. Israel will take loans from American banks to make the repayment, but at the present interest rate of 10 percent instead of the 14 percent applicable when the loans were originally taken, and thereby profit from the difference.

Economists noted that last year the market interest rate stood at only seven percent and Israel lost some $250-$300 million because the U.S. refused to allow it to re-finance its debt.

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