During today's Knesset discussion on the strengthening of the shekel against the dollar and the resulting damage suffered by industrialists and exporters, Knesset Finance Committee chairperson MK Moshe Gafni (United Torah Judaism) warned, "If the Bank of Israel and the Ministry of Finance do not take concrete measures for dealing with the strengthening of the shekel against the dollar, the Finance Committee will prevent measures detrimental to the business sector, industrialists, and farmers in the framework of the Economic Arrangements bill."
Gafni added, "The Finance Committee is greatly disturbed by the fall in the shekel-dollar exchange rate, which is harming profit margins in production, agriculture, industry, tourism, and high tech. We hope that the actions being taken by the Bank of Israel have an effect on the exchange rate, and that we will see results. Otherwise, we will hold another discussion and demand that the Ministry of Finance refrain from burdensome economic measures."
Michael Blank, head of the trading unit in the Bank of Israel market operations department, told the Finance Committee members, "We have recently taken far more aggressive action, and this trend is really bothering us."
Dr. Amit Friedman, advisor to the Bank of Israel Market Operations Department, said, "The measures that we are taking will be felt in another month, and it is necessary to wait. We have a target in this matter, and the Bank of Israel is acting aggressively in the market. Our interest rate is very low, and will remain that way until inflation settles at a rate close to the target. The strengthening of other currencies against the dollar is a global phenomenon, and the strengthening of the shekel is relatively low."
Commenting on the activity of speculators, on whom the manufacturers are calling on the state to impose taxes, Friedman said, "We are monitoring and analyzing the phenomenon. There are speculators in every foreign exchange market. At the same time, we do not regard this as manipulation."
Manufacturers Association of Israel president Shraga Brosh earlier complained about higher prices of production inputs, saying, "The shekel rose by over 10% against the dollar, which is increasing the price of inputs such as electricity, which will go up by another 2.5%, despite promises by the Public Utilities Authority (electricity) that the price would not be raised. The state is imposing more and more liabilities on the employers, such as NIS 600 million for excess insurance against work accidents, a 2.18% rise in municipal property taxes, and higher taxes on coal and coke, which is used to produce cement, at a time when the state wants to lower the cost of housing. The government is only aggravating the exchange rate crisis by increasing production costs by billions of shekels. The result is that production costs in Israel are currently among the highest in the world."
Israel Tourist and Travel Agencies Association (ITTAA) director general Hani Sobel said during the discussion, "If speculative activity is affecting the shekel-dollar rate, it should be stopped." She argued, "The strengthening of the shekel is affecting all the travel agents and internal tourism, because it is much cheaper to buy tickets and overseas vacations. The damage to local tourism is a blow to one of the economy's growth engines."
MK Oded Forer (Yisrael Beitenu), who initiated the discussion, said that the effect of the Bank of Israel's purchases of dollars was limited, and that the government should therefore help the business sector by cutting municipal property taxes and easing burdensome regulation.
Ministry of Finance budget division coordinator for industry and commerce Ido Sofer responded during the discussion by saying, "A strong shekel shows that the economy is strong." He added, "We are taking a variety of actions in order to make production easier, and there are many budget allocations for industry." Forer proposed that in cases in which new regulations are imposed on the business sector, the government should compensate business owners through grants.
Published by Globes [online], Israel Business News - www.globes-online.com - on January 30, 2018
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