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Israel’s New Economic Program Explained by Minister of Finance

September 13, 1966
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Israel has embarked on a new outline of economic activity which will alter Israel’s economy and standards of living dramatically in the next three years, Finance Minister Pinhas Sapir announced here today.

Mr. Sapir has been the principal architect of the new economic plan which was adopted by the Cabinet last night after weeks of negotiations with all parties and sectors inside Israel’s coalition Government. The Cabinet adopted the entire plan without a single dissenting vote. However, three members of the Cabinet recorded abstentions. These were Mordechai Bentov and Israel Barzilai, of Mapam, respectively Minister of Housing and Minister of Health; and Moshe Shapira, Minister of the Interior, who represents the National Religious Party.

In general, the economic program, which was officially named “An Outline of Economic Activity, ” provides a three-year plan for the stabilization of wages and prices, and general economic retrenchment, with the aim being the increase of Israel’s productivity in such a manner as to increase Israel’s exports at prices competitive in the world markets. Mr. Sapir forecast today, at a news conference spelling out the meaning and aims of the new program, that, within the next year, Israel will be able to export $1, 000, 000, 000 worth of goods as a result of the new plan.

The new program will not only freeze salaries. It will also freeze prices and reduce cost-of-living allowances. On the other hand, it will impose virtually no new taxes. The only new tax to be levied will be imposed on capital gains. Tax exemptions allowed businessmen on expenses will be smaller. Commissions paid to banks and insurance companies will also be reduced.


Mr. Sapir told the news conference that only by “dramatic” increases of exports can Israel achieve economic independence and, eventually, a balance of trade as between exports and imports. The new program, he said, might demand sacrifices from the Israeli population. “But the ultimate improvement of our standards of living, ” he stated, “demands a preliminary, painful process during which all sectors of the community will have to make sacrifices and renounce certain benefits to which we have become accustomed.”

Despite the necessity of certain sacrifices, the Finance Minister said, “the rights of the economically weakest sections of the community will be protected. These low-in-come groups will see their standards of living rise throughout the three-year period of the plan.”

One of the immediate results of the economic plan, Mr. Sapir conceded, might be the creation of a temporary period of unemployment. “But the situation might have been far worse, ” he said, “had the economic plan not been approved. In that event, we could have expected 100, 000 unemployed — with all the social, and even security, difficulties such a development would have entailed. “

The short period of unemployment, Mr. Sapir explained, is to be expected during the period when labor is shifted from non-productive employment to industrial work in plants manufacturing goods for export. “After that period, ” he promised, “everything will return to normal and perhaps to better employment conditions than previously.”


Mr. Sapir promised the country that the Government will refrain from raising any taxes, direct or indirect, from imposing compulsory loans and from permitting the increase of local taxes — except in cases of emergency. While the state budget will be balanced and maintained at the present level, he said, the Government will work toward encouragement of savings, and will make cheaper credits available to the export branches of industry.

The Finance Minister pledged that the Government will improve its methods of assessment and collection of taxes. He said the foreign currency allocation for Israelis traveling abroad will be reduced from $500 to $350. Commissions for banks and insurance companies, he said, will be reduced by 10 percent. Under the new program, basic pay in productive branches of Israel’s economy are to rise next year by sums up to 5 percent. The present cost-of-living allowance system will be preserved. However, only half the cost-of-living allowance increase will be paid in 1967 and 1968. To aid the lower economic levels of the population, heads of families earning less than 400 Israeli pounds ($133) per month will be compensated for increases in prices.

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