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WEEKLY NEWSLETTER
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Israel
Index
Israel has had a balance of payments deficit throughout its
existence, primarily because of its heavy defense burden and the
costs associated with immigration. This deficit has been covered by
capital transfers in the form of loans and, in recent years,
grants. These grants historically have come from Diaspora Jewry.
Since 1974 the United States government has become by far the most
important source of financial support, at first in the form of
loans, but since 1979 in the form of grants.
The balance of payments position fluctuated widely, following
major shifts in economic policy. Between 1980 and 1983, the
civilian portion of the import deficit rose rapidly, with a
mounting increase in the foreign debt. In 1984 and 1985, these
trends reversed themselves as increased United States grants halted
the rise in foreign debt and capital exports.
At the end of 1986, Israel's net foreign debt totaled about
US$19 billion. The size of this debt was less of a burden than it
would appear, however, because US$10 billion of it was owed to the
United States government and had a long repayment period. A further
US$5.5 billion was owed primarily to Diaspora Jewry (see
table 11,
Appendix A).
In August 1986, the Israeli exchange rate was pegged to a fivecountry currency basket. The exchange rate remained fixed until
January 1987. This policy, combined with a US$750 million United
States emergency grant-in-aid and a reduction in oil prices, led to
increased stabilization of Israel's inflation. In the first quarter
of 1988, the dollar-NIS exchange rate stood at NIS1.60=US$1.00.
Data as of December 1988
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