Israel - Current economic position and prospects

RESTRICTED Report No. EA-167c This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION CURRENT ECONOMIC POSITION AND PROSPECTS OF ISRAEL May 1, 1967 Europe and Middle East Department CURRENCY EQUIVALENTS U.S. $1.0 = Ib 3. 0 Ib-. 1.0 = U.S. $0.33 PREFACE This report is based on the findings of an economic mission to Israel in November/December 1966, composed of Messrs. J. A. Simmons and G. A. Torelli. The previous economic report on Israel (No. AS-108) was written early in 1965. It included a comprehensive summary of the country's institutional, political and social framework. In the interest of brevity, this material has not been repeated in the new report, which concentrates mainly on more recent economic developments. TABLE OF CONTENTS IJASIC DATA SUMARY AND CONCLUSIONS I. INTRODUCTION 1 II. ECONOMIC GROWTH 1 III, AGRICULTURE 4 IV. MANUFACTURING INDUSTRY 9 V. MONEY AND CREDIT 13 VI. PUBLIC FINANCE 16 VII. BALANCE OF PAYMENTS 23 VIII. PROSPECTS AND CONCLUSIONS 27 STATISTICAL APPENDIX: Tables 1-29. BASIC DATA Area: 7,993 square miles Population: 2.63 million Rate of Growth (1956-1966): 3.5% of which due to immigration: 1.75% Density per square mile: 329 Total Available Resources (Lnhl. Import Surplus) - 1966-Est: IL 13,158 million Gross National Product (1966 Est.);L/ IT 11,878 million Per capita: $ 1,500 2/ Average Annual Growth Rates, 1960-1966 Gross National Product 8.6% Gross National Product per capita 5.o% Per cent of Gross National Product 1966 (Est.) 1960-1965 Private consumption 66.0 66.6 Public consumption 21.7 19.7 Gross investment 21.1 29.2 Gross savings 10.3 13.8 Import surplus 10.8 15.b Per cent of Net Domestic Product 1965 1960 Agriculture 9. 12 Manufacturing and mining 2hr 24 Construction and utilities 9 9 Transportation and communication 9 8 Trade and services 18- 19 Other 31 28 Money and Credit Dec. 1966 Rate of change (IL Millions) % p.a. 1960-1966 Total Money supply 2,018 16.1 Time and Saving Deposits 1,430 21.0 Bank Credit to the public 1,76 17.8 Bill Brokerage 900 (approx.) N,A. Rate of Change in domestic prices 9% 8% 1/ at current market prices. 2/ at official rate of exchange. - ii - Government Operations (Fiscal years) Rate of Than ge - -1965/66 19;31966 (IF, Millions) --. Government current receipts 2,888 21 Government current expenditures 25620 24 Surplus Government capital expenditures 1,052 18 Foreign grants and loans 68o Domestic loans 348 Debt repayments -392 External Public Debt (U.S. $ Millions) 1965 i96o-1965 Total debts outstanding (Dec. 31) 91W 798 Total annual debt service l06 79 Ratio of debt service to foreign exchange earnings 12.3% 13.5% Balance of Payments (U.S. $ Millions) 1965 196o-i965 Average Commodity exports 403 281 Commodity imports 733 573 Net invisibles: of vhich -192 -163 investment income -69 -55 Net current balance -521 Unilateral transfers 341 338 Commodity Concentration of EKports 196 Average Diamonds 36 31 Citrus 18 18 Gross foreign exchange reserves Dec. 1966 1960-1965 (U.S. $ Millions) ae 613 436 I.M.F. Position (U.S. $ Millions) Quota 90 33 Drawings (outstanding) -- -- SUMMARY AND CONCLUSIONS 1. Since the establishment of the state in 1948 and despite the economic impediments resulting from relations with the Arab states, Israel has achieved a remarkable record of economic growth. During the 15 years ending in 1965 the annual growth of real output averaged 101c. By devel- oping irrigation and applying modern technology, a sustained growth in agriculture was achieved with the value of output (at constant prices) rising by more than 10% annually. Expansion in manufacturing was stimu- lated largely by a vigorous policy of import substitution and industrial output rose on average by 13% annually. 2. Since 1948, Israel has accepted all Jews wishing to immigrate. About 650,000 new immigrants arrived between 1950 and 1965. Population increased from 1.4 to 2.6 million and the labor force approximately doubled. This was one of the principal factors making possible the fast - growth of output. Another was the maintenance of a high level of invest- ment which over the period averaged 30% of GNP. The maintenance of this level of investment was made possible largely by the financial support received from abroad; in the past five years the capital inflow has financed approximately one-half of gross domestic investment. 3. The utilization of the large capital inflow was accomparied by rapid increases in wages and prices, which adversely affected the position of export industries, though offset by periodic adjustments in the effective foreign exchange rate. At the same time, production for the home market was sometimes carried to the point where output in some branches was quite uneconomic. Although there was a strong and sustained rise in exports, in the case of many products this was made possible only through a complex system of subsidies operated behind high protection in the domestic market. Some misallocation of resources resulted and as the opportunities for further expansion on the basis of the small domestic market narrowed, the authorities came to realize the need for a change in the direction of policy, placing greater emphasis on increased specialization and on promoting those export industries in which Israel might have particular advantages, and less emphasis on maintaining the highest possible rate of growth of output. As substan- tial expansion in agriculture is hampered by limited water availabilities, future growth must be based more on the expansion and diversification of manufacturing and on the provision of services. h. A further consideration leading to the change in policy was the judgment that Israel could not expect to receive indefinitely increas- ing amounts of aid from abroad. The fast expansion of the economy was accompanied by a widening current account deficit in the balance of payments notwithstanding the fast growth of exports. From $283 million in 1955, the current deficit rose to $570 million in 1964, and although Israel had been able to raise the anounts of capital required to cover the deficit - in -ii - fact almost $500 million were added to foreign exchange reserves over the period - it was felt that the deficit could not be allowed to widen further without serious risks and that it should indeed be reduced. 5. Aiming, therefore, to halt the wage-price spiral, to stimulate further export industries and to narrow the current deficit in interna- tional payments the authorities took no action to maintain the level of effective demand when in 1965, partly as a result of a drop in immigra- tion, a recession developed. mmigration dropped further in 1966 and the recession spread. Unemployment rose and although the increase in prices and wages was not halted, considerable progress was made in moderating the demands for wage increases to be negotiated in 1967. Substantial progress was also made in narrowing the adverse balance on current account. In the past two years exports rose by 32%, imports by only 8% and the adverse balance was reduced by just over $100 million. The cost of these achievements was a sharp decline in the growth of output which rose by only 1.2% in 1966. 6. Even apart from the effect of policies designed to check infla- tion and reduce dependence on the inflow of foreign resources, there is likely to be a rate of growth below the average of recent years. Realis- tic growth targets in the next several years will no doubt depend on expectations regarding the inflow of capital. What in fact will be raised abroad remains to be seen. Receipts from transfer payments of various kinds are likely to remain above $300 million a year, and direct investment could be of the order of $100 million annually. Borrowing is less easy to judge: more than $100 million is expected from the sale of Israel Development Bonds, and other possible sources include the U.S. Government and privately placed debt and supplier credits. It would seem at present that Israel has good prospects of obtaining over the next few years an inflow of foreign capital from sources other than the Bank com- mensurate with its projected needs, even when taking into account the fairly heavy debt maturities during that time and the many uncertainties in the situation. This assessment of course does not take into account the possibility of major changes in Israel's foreign relations or in immigration which could affect both the need for external finance and its supply. 7. Israel's total external medium and long-term public debt amounted to U.S. $1050 million in September 1966. Short-tem loans repayable at the same date totalled just over $100 million. Average service payments on the external public debt over the next four years would equal 12% of 1966 export earnings. Assuming that foreign exchange earnings would rise by 14-15% annually and that Israel would continue to borrow the amounts indicated above, the ratio of service payments to foreign exchange earnings in 1970 might approximate 10%. In view of the high degree of stability in Israel's income from unilateral transfers it is reasonable to take them into account also in estimating the resources available to meet debt servicing obligations in the next few years. If transfers are added, the ratio of service payments to disposable foreign exchange income would be about 8.5% in 1970. There seems no reason to doubt that Israel will be able to meet its debt-servicing obligations in the next several years, particularly as the heavy repayments due on Development Bonds in 1969 can most probably be offset by expanded bond sales at that time. I. INTRODUCTION 1. Since the creation of the state in 198, Israel has enjoyed considerable domestic political stability. The Mapai (labor party) has been in power since 1948 in coalition with smaller political groups. The November 1965 general elections saw the coalition between the Mapai and Achdut Haavoda (a small socialist party), headed by Premier Eshkol, succeed against Ben-Gurion's Rafi party; the ensuing coalition Government between the Mapai, Achdut Haavoda and the Religious Party obtained a majority of 75 seats in the 120 seat parliament. The next general elec- tions are due in 1969. 2. Since the war of independence,it has not proved possible for Israel to reach an accord with the Arab states. This element of con- tinuing political uncertainty has inevitably had a major impact on the life of the country, for example through the need for heavy spending on defense and through the absence of commercial relations with Israelts nearest neighbors. At present, no political settlement between Israel and the Arab world is in sight. II. ECONOMIC GROWTH 3. Since its establishment as a state Israel has achieved a remarkable record of economic growth. During the fifteen years ending in 1965 the annual growth of real output averaged 10 per cent. The value of agricultural output (at constant prices) rose by more than 10 per cent annually and industrial output by 13 per cent. During these years Israel absorbed 650,000 new immigrants, population increased from 1.4 to 2.6 million, and the labor force approximately doubled. This was one of the principal factors making possible the fast growth of output. Another was a high level of investment which over the period averaged 30 per cent of GNP. h. Economic growth has not been even. Since 1960, Israel experi- enced a boom in the years 1961-64, when output grew by 11 per cent per annum, followed by a slow down in 1965 and 1966 when output rose by 7 per cent and 1.2 per cent respectively. The recession in the past two years started with a decline in housing construction as the supply of homes began to exceed demand in 1965, (partly as a result of the drop in immigration) and as the effects of the recession in construc- tion spread to other sectors, investment dropped sharply. The govern- ment for policy reasons deliberately took no counter-cyclical measures to maintain the overall level of investment demand and the fast growth of the economy. 5. Employment rose by 4-5 per cent annually in the years of boom, by 3 per cent in 1965 but dropped slightly in 1966. Data on unemployment differ, but the total of registered unemployed rose to 36,000 in October 1966, nearly 4 per cent of the civilian labor force. However, this probably understates considerably the full extent of unemployment. Over the five-year period, the stock of fixed capital rose by 10-11 per cent annually and labor productivity increased rapidly - by 6 per cent annually in the early 1960's, by over 7 per cent in 1963 and 1964 and by about 4 per cent in 1965. Sharp increases in productivity were recorded also in some sectors in 1966, but the overall increase in productivity was very small. Savings and Investment 6. Though gross investment fell slightly in 1965 and sharply in 1966 (by about 14 per cent), it nevertheless represented more than 26 per cent and 21 per cent of gross national product in these two years, as compared with 30 per cent in 1960-64. The greater part of the decline in investment in 1965 was due to a fall in inventory investment and in purchases of ships. Fixed investment in most sectors held up well. In 1966, however, investment declined in all sectors except agriculture, with particularly sharp falls in housing construction, industry and transportation. While government plays a major role in investment decisions, financing directly about 40 per cent of domestic investment and controlling indirectly a much larger proportion, it deliberately -2- declined to offset the fall in private investment, partly, as indicated above, for policy reasons and partly because of a lack of suitable projects which could be immediately begun. 7. The broad pattern of investment financing has not changed radi- cally in the past five years. Domestic savings 1/ - amounting to 13-14 per cent of GNP - continue to finance only about half gross domestic invest- ment. This proportion was somewhat lower in 1962 and 1964, years of sharp increases in investment, when capital inflow financed nearly two-thirds of investment. Data on domestic savings are incomplete, but broadly, savings in the public sector are marginal - net dissaving was recorded until 1963 - the non-profit institutions (primarily providing health, education and wel- fare services) dissave while private sector gross saving has risen less rapidly than GNP in the past five years. Surveys of savings of households indicate that average savings amount to 4-5 per cent of disposable personal income, a level considerably lower than in several western countries. Data on business saving are not available, but the greater part of the provisions for depreciation is presumably made by business and such provisions have accounted for about a half of private sector gross saving in recent years. Prices 8. Israel has experienced a sustained rise in prices and wages since the early 1950's. From 1950-1965 the cost-of-living index rose on average by 10.5 per cent annually while the average annual rise in the index of daily wage earnings was 15.4 per cent. This was a much faster rate of in- crease than occurred among Israel's major trading partners, and in conse- quence, periodic devaluation of the Israeli pound was necessary. Whereas until 1951, the Israeli pound was at par with sterling, the exchange rate had by 1962 been reduced to the present rate of IL 3 to the U.S. dollar. The further increases in wages and costs since then led to the re-introduc- tion of export incentives late in 1966. 9. The rise in prices and wages has probably been an unavoidable accompaniment to the rapid growth of the economy. The need to create jobs in order to absorb large numbers of immigrants into employment led to severe restrictions on imports and in this situation the utilization of the massive capital inflow characteristic of the period meant unavoid- able inflationary pressures reflected in rising prices and costs. On the whole the policy of "forced growth" has been successful and great ingenuity has been shown in devising means to avoid many of the problems associated with prolonged inflation. However, the position of export industries has tended to be continuously undermined despite successive devaluations and the granting of exchange premia and other incentives to exporters. 1/ Excluding current transfers from abroad. - 3 - 10. In the past five years, the rise in prices has been moderated, averaging 7 per cent annually while average earnings have risen by 12 per cent annually. In 1965, however, hourly wages averaged 16 per cent above 1964 - wages in the public sector rose by 26 per cent - and the authorities appear to have decided that if Israel were to achieve a greater measure of price stability and to move gradually towards reducing its dependence on external aid by narrowing the current deficit in the balance of payments, the rate of increase in wages would have to be moderated. In support of this policy, therefore, when the present recession began, the government took no counter-cyclical action to maintain overall demand, and in this way sought to reduce the pressure of demand for labor. It is still too early to judge the full effects of this policy. Prices have continued upwards, rising by about 9 per cent in 1966, but they appear to have stabilized at the beginning of 1967. Wages have also risen by over 13 per cent, but there are indications that as a result of the changed conditions in the labor market wage increases will be greatly moderated in 1967. III. AGRICULTURE 11. Agriculture made a major contribution to the initial growth of the Israeli economy. The large increase in population created strong pressures on demand for food products and provided a powerful incentive to the expansion of output. The Government emphasized the need for expanding agricultural output to avoid excessive dependence on imports of foodstuffs; such expansion was, in several instances, encouraged despite the lack of favorable conditions which resulted in high production costs. 12. Over the last ten years the value of agricultural production at constant prices increased at an average rate of some 10 per cent per annum; since 1959-60, however, this rate of expansion has been somewhat slower (6-7 per cent per annum). Among the products for which output expanded faster are sugar beet, wheat, citrus fruit and other fruit, poultry and eggs; vegetable production registered remarkable gains particularly in most recent years. Citrus is the single most important crop in Israel and accounts for some 20 per cent of the total value of agricultural production; its exports amount to some 18 per cent of total commodity export earnings of the country. 13. Progress made by mechanization and greater use of fertilizers, pesticides and other inputs were responsible for a large part of the gains in agricultural productivity. However, among the factors which contributed most to the expansion of agricultural production were the increase in the cultivated area and the expansion of irrigation. Efforts in these directions were particularly remarkable during the first ten years of the State; from 1958 to 1966 the cultivated area increased much more slowly (from about 00 thousand hectares to 420 thousand hectares) while the irrigated area increased in the same period from 120 thousand hectares to 155 thousand hectares. The development of water resources has been entirely under government control and most of the water used in agriculture has been provided by government projects. The extent of unexploited resources has been rapidly declining and the water planning authority has estimated that 85 to 90 per cent of the potential resources of the country have already been developed; of this, 70 to 80 per cent is currently used in agriculture. 1. Unfavorable natural conditions and the need to carry water over great distances through pipelines have made the development of water resources for irrigation very expensive. However, water rates charged to farmers do not reflect the real cost of bringing irrigation water to the users since they have been heavily subsidized: the unit price of irrigation water from government developed projects has been estimated to be less than one-third of the cost to the Government. 15. Employment in agriculture, which between 1955 aid 1960 increased from 102,000 to about 120,000, declined over the following five years both absolutely and relatively; agricultural employment now represents about 13 per cent of the total active population. The continued expansion of output which has been accompanied in recent years by the decline in agricultural employment, has been made possible inter alia by the con- siderable development of mechanization. The growing use of agricultural machinery has been favored by the structure of farming prevailing in Israel, which is based, to a large extent, on collective farming (the Kibbutzim) and on cooperatives (Moshavim). The size of farms operated by the Kibbutzim has been larger than would have been the case under private farming and has consequently made it profitable to introduce mechanization on a large scale. The purchase of machinery and equip- ment has normally been assisted by credit facilities on particularly favorable terms. 16. The government exercises a broad control over the pattern of agricultural output by various means: it fixes production quotas of a num'oer of commodities (such as sugar beet, tomatoes, poultry) 'and has also a strong influence over prices of agricultural commodities and on the import policy to be pursued in each case. To check the continuing pressure of demand on prices of agricultural products, the government has encouraged agricultural producers to expand output by means of both support prices and subsidies for domestically produced commodities and by subsidiz- ing inputs. Subsidies have traditionally represented a large share of agricultural income; in 1964-65 they amounted to some 20 per cent of it. The major agricultural subsidies in 1964-65 are shown below: Table 1: AGRICULTURAL SUBSIDIES IL Million Eggs 25.0 Milk 32.8 Cattle 10.3 Vegetables and potatoes 11.6 Wheat 3.6 Other 14.5 output subsidies 97.8 Fodder 15.1 1 . /Y Water 13.2 - Fertilizers 2.9 input subsidies 31.2 - 6 - In addition, protection against imports of certain domestically grown crops and provision of agricultural credit on easy terms are two impor- tant elements of the policy of protecting farmers? income which has been pursued by the government. 17. Israeli agriculture has now achieved a high degree of self sufficiency: about 80 per cent of consumption is covered by production at home. Heavy dependence on imports remains primarily for such products as cereals (mainly coarse grains) and meat other than poultry. Cereals were largely imported in the past from the U.S. under the PL 480 pro- grams;2/prices of imported cereals competed on the Israeli market with local production and contributed to keeping prices relatively low. This has certainly been an important factor in expanding the domestic poultry industry on a competitive basis. As to production of meat other than poultry, development has been very slow and Israel has to import about 60 per cent of domestic requirements of beef. The lack of pasture land has been an important limitation in raising cattle, which therefore has to be fed to a large extent with concentrates. As a result, beef production has proved to be profitable only as a by-product of the dairy industry. 18. The development of Israeli agriculture is now entering a new phase in which availability of basic resources, such as water and culti- vable land will limit the expansion of output. The government is fully aware of this problem and agricultural policies, which in the past empha- sized the need to reach self-sufficiency in a wide range of farm products, are now likely to favor a more selective growth of output, encouraging the development of those crops which enjoy favorable production conditions in Israel and can therefore compete in foreign markets and to reduce the level of subsidies per unit of output; the total amount of subsidies has not increased in most recent years and the aim is to reduce them. 19. As a result of the limited water resources remaining to be exploited and the rapidly increasing cost which will have to be sustained for their development, the water authority is planning to slow down con- siderably the development of new resources and to reduce the share of additional supplies allocated to agriculture. Between 1966 and 1970-71 water supply for irrigation is expected to increase at a rate of 0.5 to 1 per cent per annum, compared to an expansion of 8-9 per cent per annum achieved over the last 15 years. The increase in water supply to agricul- ture over the next several years is expected to be concentrated more on the existing irrigated area than to enlarge the area under irrigation, and to favor the development of a more intensive type of agriculture, with greater emphasis on higher value crops for which there seem to be good export opportunities. 1/ Israel now benefits to a much lesser extent from such programs. 20. The Israeli authorities have indicated that over the next three to four years there will be an increase in the area under vegetables, melons and other fruits, flowers, cotton. Increased output of these crops will require much of the additional water to be supplied to agriculture. The high production costs for such crops, however, are likely to be more than compensated for by the fact that fruits, flowers and vegetables to a large extent will be produced out of season, and sold in European markets at favorable prices. 21. Citrus fruits will remain a basic crop in Israel, as well as one of the major export items of the country, but practically no increase is expected to take place in the area under citrus, which at present amounts to approximately 45,000 hectares, about one-fourth of the total irrigated area of the country. The basic liitations cn enlarging to any considerable extent the area of citrus (since 1963 new planting has been kept to a minimum) are firstly the scarcity of water and secondly the uncertainties in the export markets. Citrus exports amount to some 65 per cent of output and a large portion is directed towards E.E.C. countries. The protection given by the Common Market to Italy and associated countries which produce and export citrus through high tariffs and the recently introduced system of the reference price (by which an additional import levy is imposed on oranges imported into the Common Market at a unit price below the reference price) is expected to reduce the profitability of orange exports and has caused Israel to take a careful attitude towards future citrus planting; a decline in citrus prices was already noticed at the end of 1966. While orange yields are very high, production costs are probably higher in Israel than in most other producing countries in Europe or North Africa primarily as a result of the high costs of labor and water. Judging from the planting carried out over the past several years, the output of oranges is expected to grow over the next four years at an annual rate of 8-9 per cent. 22. About a quarter of the output of fresh oranges is channeled to the processing industry. This industry has developed successfully over the last several years and sales abroad of citrus juices and concen- trates have increased very substantially since 1960. The high utilization of the productive capatity of this industry which has been made possible by the progress made in extending the citrus cropping season, has contri- buted to keep production costs relatively low and enabled this industry to compete in the European markets. Further progress is expected to take place along these lines by utilizing the existing capacity for processing tomatoes and other vegetables. 23. As a result of increased cost consciousness and, especially, of a reduced rate of expansion of resources in agriculture, it is to be expected that the growth of agricultural output over the next several years will be slower than in the past ten years: the estimate provided by the Israeli authorities of an increase in the value of output of 5-6 per cent per annum over the next four years seems reasonable. A decline in the export prices of oranges is also expected to be a factor accounting for the slower expansion in the value of agricultural production. - 8 - 24. Citrus exports, which are handled efficiently by the Citrus Marketing Board, the agency which controls all marketing of oranges and other citrus fruit, are expected, over the next several years, to increase by 8-9 per cent per annum; the same rate of growth as for output. Since prices paid for Israel's oranges are expected to drop as a result of the Common Market policies, total revenues from citrus exports are likely to increase at a lower rate. There are more favorable prospects for exports of other agricultural produce such as early vegetables, tropical fruits and flowers, which over the last two years have yielded revenues higher than the Israeli authorities originally expected. As a whole, agricul- tural exports may well increase at a rate of 9-10 per cent per annum over the next few years and yield by 1970 more than the $120 million projected two years ago by Israel. -9- IV. MANUFACTURING INDUSTRY 25, Output of manufactures continued to expand rapidly during the early 1960's. From 1960-64, the growth of industrial output averaged 15 per cent annually and it was only in 1965 that the growth rate fell to 10%. As the current recession spread through the economy in 1966 production slowed further, and total output increased little over the year. As a proportion of net domestic product, manufacturing (including mining and quarrying) accounted for 24.2 per cent in 1965, marginally higher than in 1960. 26. Since the establishment of the state, the main emphasis in industrialization has been placed on production for the domestic market. Consumer products have played a major role, with the food and tobacco and textiles, clothing and footwear industries together accounting for 40 per cent of industrial output in 1965. In the early years of the state, emphasis was given to textiles as a relatively labor intensive industry and one with which immigrants from Eastern Europe had traditionally been long connected. The growth of food processing was stimulated in part by the sustained expansion of agricultural output. The rapid expansion of construction gave the stimulus to industries producing construction materials, while Israel's natural resources - principally potash from the Dead Sea, phosphates and copper - were exploited primarily for export. Israel has a small uneconomic steel plant using scrap metal. An oil refinery has provided the basis for the development of petro-chemicals. Other branches in which development has been rapid include fertilizers, pesticides, pharmaceuticals, rubber (chiefly tyres), and plastics, paper and board, domestic electrical equipment, small electric motors, trans- formers, and mechanical equipment (including some machine tools). 27. Israel is virtually self-sufficient in processed foodstuffs, tobacco manufactures, textiles and clothing, footwear, and a variety of producer goods, and partly for strategic and social reasons she has pushed industrial development to the point where in some sectors a range of products is produced in too small a quantity to be economic. This is reflected in the level of tariff protection which on average amounts to about 120 per cent, but in some branches is much higher - e.g. in textiles and motor vehicle assembly - and for about one-quarter of the total value of industrial production tariff rates exceed 225 per cent. Moreover, in the case of products manufactured from imported materials and parts, the effective rate of protection is higher than the nominal import duties. Administrative protection still applies to about 14 per cent of total industrial output, though the proportion is much higher (40-60 per cent) in some branches, including foodstuffs, paper products, rubber and plastics and chemical products. 28. A characteristic of Israel industry is the large number of small firms. According to the industrial census of 1965, about 85 per cent of all industrial establishments employed less than 10 persons each. This high proportion reflects in part the inclusion of repair and maintenance - 10 - shops in the industrial category. Nevertheless there were only 320 firms (1.3 per cent of industrial establishments) employing 100 persons or more. 29. The small scale of operations while appropriate in some branches is less appropriate in others. In the diamond cutting industry, the typical firm is small - on average each firm employs 20 workers - and the required investment in equipment is low. The industry, producing alnost entirely for export, if efficient and there are few significant economies of scale. In textiles many firms are also small - the average number of employees per firm is 26. With a small internal market, even the small firm is insufficiently specialized to produce the required variety of products on a sufficient scale to compete successfully with imports with- out high tariff protection. Hence for more than half the output of the Textile industry tariff rates exceed 100 per cent and for almost a third 500 per cent. In motor vehicle assembly there were three firms; a fourth commenced production at the end of 1966. In 196$, production of passenger cars and commercial vehicles together totalled only 7,600 units. Production on this scale is uneconomic and the industry could not survive without high protection. 30. Diamonds are the leading industrial export. More than 98 per cent of production is sold abroad. The value of diamond exports at $132 million equalled L1 per cent of all industrial exports in 1965. However, on a net basis the contribution of the industry is much smaller; imports of rough diamonds totalled $97 million in 1965. A substantial part of production is exported also in the case of citrus products (juices and concentrates), motor tyres, mine products (copper and phosphates) and chemicals (potash). Surprisingly, textiles and clothing are also important export items. About a quarter of the industry's output is exported. This is made possible partly through the general incentives offered to exporters and partly through a subsidy scheme operated y the industry which raises prices to domestic consumers to subsidize exports. Though subsidy schemes do not operate in other branches, in many cases domestic cartels together with high protection in the home market enable manufacturers to sell abroad at prices close to marginal costs. Overall, 22 per cent of total industrial output was exported in 1965. 31. While the broad aim of government policy is still to foster fast industrial growth, recognizing that the scope for expansion on the basis of the rather narrow domestic market alone is limited, increasing emphasis is being given to the expansion of export industries. Another important objective continues to be to promote the dispersal of the population to more thinly settled areas, and special incentives have therefore been offered to industrialists setting up plants in these so-called "develop- ment areas". Incentives include exemptions for specified periods from various property taxes, accelerated depreciation allowances and allowances for expenditures on research, income tax concessions and preference in obtaining loan capital from governmental sources. Export industries obtain similar concessions for approved investments and in addition refunds of duties paid on imports of raw materials and parts and priority in obtaining - 11 - credit which is made available at 6 per cent, a rate of interest about half or less than the rates paid by manufacturers producing for the domestic market. More recently exporters have been granted izrcentiAe - varying from 3.5 - 8.5 per cent - over the official exchange rate, related to the value added of the various export products, and the Government is giving consideration to providing investment grants and higher depreciation allowances to approved industrial ventures, again with the emphasis tending to be placed on export industries. Besides influencing the directions of industrial development by these means, the Government also plays a more direct role through the provision of capital to important enterprises of a semi-public nature, such as the Dead Sea Works, Chemicals and Phosphates, Haifa Refineries, and the planned new chemical complex at Arad. However, the bulk of finance for investment in industry is obtained from private equity participa- tions and retained earnings, while The Industrial Development Bank of Israel remains the principal institutional source of medium- and long- term capital. Between 1960 and 1966, IDBI's loan approvals represented on average almost 23 per cent of estimated gross industrial investment. 32. The Government is placing considerable emphasis in the expansion of manufactures for export on those branches which can most effectively utilize Israel's special endowments. Apart from her limited raw materials, her resources of highly skilled manpower are considered to be the most important. Whereas Israeli wage levels in industry in relation to labor productivity are not, in general, low by European standards, with the rather even distribution of income prevailing, salaries of highly skilled scientists and engineers are substantially lower. Moreover research in selected fields is at an advanced level, but so far only limited progress has been made in translating the results of research into products which can be exported. This is a problem towards the solution of which govern- ments in a number of countries have provided official support. The Israeli Government in cooperation with private interests recently established the Israel Research and Development Corporation to assist in identifying and financing the commercial exploitation of technological advances. 33. While considerable emphasis is placed on the expansion and development of "science-based" industries, rapid progress in producing a range of wholly new products is not foreseen. Thus in the next five years, the expansion of exports of manufactures is expected to consist largely of products already exported. Chief among these are diamonds where a growth of the order of 60% is looked for. The industry expects to be able to expand its share of the trade in small diamonds as well as meet the growing demand for the medium size diamonds in which it is already predominant. A fast growth is foreseen in processed foodstuffs, in chemicals, particularly potash and phosphates as a result of the planned doubling in output of the Dead Sea Works and the construction of the new Arad complex, and in selected lines such as irrigation pumps and equipment, and books and teaching devices in which Israel has already acquired particular - 12 - expertise. Progress in establishing new exports, such as medical electronic equipment, new drugs, and laboratory and optical equipment is expected but together these "new" items will account for no more than 10-15% of the total increase of $400 million in exports of manufactures officially forecast for the next five years. This overall increase implies an average growth of 16 per cent annually, compared with a growth rate of 17.4 per cent from 1960-65, and of 16 per cent from 1964-66. 3h. In order to achieve the export targets, some shift in the balance of resources will be necessary, particularly if immigration does not expand above the level of 1966. To help promote the necessary re-structuring of the economy, the government envisages a gradual liberalization of imports as well as the more direct encouragement of export industries. Import liberalization has, however, progressed slowly and as administrative pro- tection of domestic industries has been lifted, protection has been accorded through the tariff. The 10 per cent cut in tariff rates on liberalized imports effective from November 1, 1966, is small in relation to the general tariff level; decisions on further tariff reductions arz expected by the 7aiddle of 1967. 35. In some respects, government policies towards industry conflict. Giving high protection to industrial branches depending mainly on the domestic market indirectly penalizes the industries, actual or potential, whose markets are mainly abroad. The desire to expand the population in development areas results in additional real costs of setting up plants in those areas which, directly and indirectly, make export less profitable. 36. The impact on the growth of the economy of supporting uneconomic industries has been mitigated by the very large amounts of aid Israel has received from abroad. When, as is expected, foreign aid diminishes in amount or is obtainable only on less favorable terms, and exports have to cover a greater share of import requirements, the real cost of supporting uneconomic industries would become more burdensome. In this context a progressive liberalization of imports during the remaining years of large capital inflows would assist in promoting the desired changes in the industrial structure and would at the same time help to reduce the infla- tionary pressures to which the capital inflows give rise. - 13 - V. MONEY AND CREDIT 37. The high rate of expansion of the Israeli economy has been ac- companied by a fast expansion of the money supply and of other less liquid assets in the hands of the public. Between 1960 and 1964 financial assets in the hands of the public (money and quasi money) increased at an annual average rate of 22 per cent, which greatly exceeded the growth rate of GNP. There is little doubt that this expansion contributed very substantially to the development of demand pressures and to the inflation which for many years has accompanied the economic development of thu country. The expan- sion of the money supply and of less liquid deposits proceeded more slowly in the years 1964 to 1966; the money supply, in particular, increased at an average annual rate of only 8 per cent per .nnum. 38. The major source of the expansion of the financial assets of the public has been the accumulation of large foreign exchange holdings. In the period 1960-65 the increasc in foreign exchange reserves contributed by more than 60 per cent to the increase in the supply of money and quasi- money. The expansion of credit to the public, which averaged about 17 per cent from 1960 to 1965, was also an important factor in the monetary ex- pansion. In 1966, credit to the public increased somewhat faster than in previous years, but a large part of this increase was in substitution for short-term suppliers' credits from abroad as a result of the growing cost of money in international markets. 39. Credit to manufacturing industry now represents about 40 per cent of the total credit extended by the banking system; it tripled be- tween 1960 and 1965, in line with the pace of growth of production. Credit to the Government contributed to monetary expansion particularly during the fifties. In more recent years the Government has followed a policy of consolidating its debt by heavy and steady recourse to bond issues, particularly through social security institutions which represent a sheltered market for Government paper. 40. The techniques adopted by the monetary authorities to control the expansion of the means of payments have primarily consisted in a series of incentives aiming at reducing the liquidity of the financial assets of the public and by imposing high reserve requirements on com- mercial banks. The attractiveness of less liquid deposits to the public has been raised by several means. The interest rate on time deposits has been recently increased to 8-11 per cent while savings schemes, which carry a five year maturity, bear the option of al 8-9 per cent interest rate or a lower rate combined, however, with linkage to the cost of living. Moreover, special deposits, Pazak and Tamam, have succeeded in absorbing much of the inflow of foreign exchange to Israeli citizens as restitution payments from West Gerniny and now account for about three-fourths of the total resources of the public in less liquid deposits. The attractiveness of these deposits rests in the fact that they are linked to the value of the dollar (Pazalk) or actually kept in foreign currency (Tamani). - lb - 4l. Linkage to the cost of living, applied to most savings and other less liquid depositas wII as to most loans and bonds issued in Israel, remains a basic feature of the Israeli financial system and has contribu- ted to the mobilization of savings by banks and other financial institu- tions. The authorities take the view that linkage clauses in Israel can represent an inflationary mechanism built into the system, but it is clear that the Government will have to wait for a period of relative price stability before revising the system. h2. Regulation of commercial banks'liquidity through reserve require- ments remains one of the most important instruments of monetary policy. Commercial banks' liquidity regulations remained very strict until 1964 in view particularly of the continued, substantial accumulation of foreign exchange assets and their impact on domestic liquidity. In that year com- pulsory reserves of commercial banks in relation to their sight liabilities amounted to 69 per cent; however, 22 per cent was exempted from reserve obligations and had to be used for so-called "directed credit" (credit operations authorized by the Bank of Israel for specified purposes, mainly to finance exports). 43. Since 1964, the expansion of the means of payments has proceeded more slowly and in view of the slackening of economic activity in 1965 and particularly 1966 the monetary authorities have somewhat reduced the com- mercial banks reserve requirements which in November 1966 were fixed at 66 per cent. However, together with a decline in reserve requirements the authorities have been granting banks larger exemptions from compulsory reserves to enable them to raise the amount of directed credits with the fhnds so released. In November the exemption was increased to 25 per cent of the banks' sight liabilities so that the effective reserve requirements have since amounted to h1 per cent (66 minus 25). 44. Recent reductions in quantitative credit restrictions have there- fore given way to larger qualitative (selective) credit controls, as witnessed by the larger proportions of resources that commercial banks have to devote to directed credit. Commercial banks can therefore freely dispose of only about one-third of their resources from sight deposits for their lending operations. 45. One reason for this rather complicated system of credit controls is to ensure that certain strategic sectors of the economy, particularly export industries, receive sufficient credit. Moreover, export credit is subsidized by the Government so that the cost of such credit does not exceed 6 per cent, 1/ compared to a maximum interest rate on bank loans established by law at 10 per cent for credit to agriculture and industry and 1/ Commercial banks can charge a maximum of 9 per cent on the so-called directed credit, but the effective interest rate to the exporter is reduced to 6 per cent by subsidies from the Government and the Bank of Israel. - 15 - 11 per cent for credit for other purposes. The government intervenes al1o in o:her areas to reduce the cost of credit; for instance, credit distributed by banks with resources supplied by the government and ear- marked for specific purposes such as projects in deirelopment areas and mortgage Icar.s, carry rates between 4 and 8 per cent only, 1 6. 7ha artificially low interest rate which is applied to a number of credit operations and, in general, the rationing of credit which has been in operation to favor certain sectors of the econoir, are factors which have contributed to the development of a parallel credit market ("bill market") by which credit operations, mostly short-term, are car- ried out outside the banking system, Nore recently, commercial banks started playing a role in the bill market by giving their guarantee on such loans up to a total amounting to 3 times their equity capital or 1.5 times the amount of their liquid assets. The bill market has grown very rapidly in the last five years; in 1965 credit of this type amoun- ted to IL 774 million compared to IL 1,088 million of credit from banking instituti=s. The najor feature is the high interest rate prevailing for such operaticns, {18-20 per cent), which is not subject to the limitations established by the law. A rate somewhere between the legal maximm and the current rate in the free market would reflect more realistically the high cost of capital in the country. The interest rate prevailing in the bill market declined appreciably in the course of 1966 as a result of re- duced economic activity and lower pressures on the money market. This trend may well continue in the near future, but with the revival of ecc- nomic activity cperations cn the bill market are likely to pick up and the interest rate differential betueen the two markets would wider_ again. The Israeli authorities have been considering for some time the possibil- ity of abolishing the interest rate law, which would likely bring, as a result, an upward movement in the interest rate structure (i.e. above the current bank rate, but below the "bill" rate) while the bill market would, at the same time, disappear. flowever, the authorities are rightly concerned with the fact that as a result of such change the present pattern of sub- sidies would probably change and that certain branches of the economy, par- ticularly the export sector, would be heavily penalized. Develoarent Finance and the Capital Market 47. Government borrowing from domestic sources has increased stead- ily in recent years despite the sluggishness of the capital market since 1963. Institutional investors (social security institutions, insurance companies etc.) represent a sheltered market for government paper and hold a substantial anouint of the outstanding governent debt; moreover, the government strictly controls the capital market (all new issues have to be authorized) and over the last several years no new bond issues, other than those of the government or government companies, have been - 16 - permitted, Internal government debt l/ increased by about IL 500 million between March 1963 and March 1966, of which about IL 300 million was bor- rowing from the National Insurance Institute. In the course of 1966, the government stepped up its borrowing directly from the market, primarily by issuing medium and short-term bends to the public, which carried an effec- tive interest rate, after taxes, of 7.50-8.50 per cent; between March and November 1966, about IL 100 million was raised on the market in this form. 48. The ambitious development budget for 1967-68 will require a sub- stantial increase in gross government borrowing on the domestic market, to approximately IL 420 million. This amount is considerably higher than what the government borrowed on the domestic market in any of the previous sev- eral years and would require, in addition to substantial recourse to insti- tutional investors, a particular effort to mobilize resources directly from the public. VI. PUBLIC FINANCE 49. The public sector includes the central government, the national institutions and the local authorities. The Jewish Agency is the most important of the national institutions. It existed long before the State of Israel, its primary purpose being to encourage and finance inmigration and land settlement. For some purposes it is appropriate to include also in the public sector some non-profit institutions such as the Hebrew University and Hadassah Hospital which provide public services principally in health, education and welfare. 50. Given the circumstances surrounding the establishment of the state, and the subsequent absorption of great numbers of immigrants, the government together with the national institutions necessarily played a dominant role. In filling this role, the public sector received help from abroad on a scale unequalled in any other country of comparable size. As the economy has grown the role of the public sector has declined relatively, but it still remains very large as does the extent of help from abroad. A summary presentation of the transactions of the public sector as a whole in 1964 and 1965 is shown in Table 2. I/ It includes: medium and short-term bonds (3-18 months) placed with the public and Banks, long-term bonds, treasury notes held by the Bank of Is- rael, long-term loans from the Bank of Israel and from the National Insur- ance Institute. Since 1962 the government discontinued issuance of dollar- linked bonds; however, linkage with the cost of living has remained normal practice for long-term bonds. Tabl. 2 RECEIPTS AND PAYETS OF THE PUBLIC SECTOR 1961- 65 (II Million) Re cei - 1964 1965 Payments 1964 1965 Transfers and transactions in goods and services Taxes 2,530 2,965 Purchases Miscellaneous revenue L38 471 on current account 1,769 2,117 on capital account 547 614 Total 2,968 3,436 Interest payments 321 341 Unilateral receipts from Transfer payments and grants 443 563 abroad 217 286 Subsidies 244 253 Total 3,185 3,722 Total 3,324 3,888 Transactions in financial claims Collections on account of Long-term loans granted and long-term loans 101 95 participation in share capital 556 597 Long-term loans received Repayment of long-term loans Foreign 606 692 Foreign 315 306 Domestic 240 302 Domestic 96 113 Short-term credit (net) 2'oreign 7 96 Domestic a/ 43 -97 Trom the banking system b/ 109 94 Total 1,106 1,182 Total 967 1,016 Total receipts 4,291 4,904 Total payments 4,291 4,904 T xcliding credit from the banking system. bJ Including long-term loans and securities, .. cank of Israel: Annual Report, 196t. - 18 - 51. Public sector expenditures for goods and services rose by 22 per cent annually between 1960 and 1965, rather faster than the growth of GNP, and in 1965 were equivalent to 28 per cent of GNP. Including expenditures of non-profit institutions, the total equalled 30.5 per cent. In addition the public sector was the principal channel of loan finance to the economy, and directly and indirectly controlled about half of all investment financ- ing. 52. In the public sector (excluding non-profit institutions) domes- tic revenues are sufficient to cover all current expenditures and leave a small surplus averaging 6.5% of current expenditures in 1964 and 1965. Though the surplus isstill small, the position has improved markedly over earlier years. As late as 1960, the public sector incurred a deficit on current account. Direct investments and the loan capital provided by the public sector are in effect financed by grants from abroad and by foreign and domestic loans. In 1965 direct investments and net lending by the public sector equalled IL 1.2 billion, about a quarter of total expendi- tures. Three quarters of the financing came from foreign grants and loans, the balance being provided from the current surplus and domestic borrowing. The share of foreign financing did not change significantly in the past five years, but there was a decline - by about 50 per cent - in the share of foreign grants. This was reflected in a steady rise in debt servicing obligations over the period to equal 15.5 per cent of total public sector expenditure in 1965. ,3. The low level of savings achieved on current account partly reflects the heavy burden of defense spending, which equals more than 8 per cent of GNP, absorbs nearly a fifth of total public sector expenditures and about a third of the central government's current spending. This pro- portion rose slightly betw 1960 and 1965 as did the share of education. Spending on agriculture and water development declined relatively, reflect- ing principally the completion of the major investments in the National Water Carrier. The functional breakdown in public sector expenditures in 1965 is shown in Table 3, while the pattern of spending of the central government alone is shown in Table 4. 5h. Central government revenues account for almost 90 per cent of all public sector revenues. In implementing its policy of lessening the dependence of the Israeli economy on outside help, the government places considerable emphasis on an increase in public sector saving. With a pro- gressive direct tax structure, receipts from direct taxes have risen more rapidly than national income in the past 5 years - they now account for 50 per cent of all tax receipts - and the government believes that, while it has promised not to raise tax rates in the next three years, revenues will continue to rise fast enough to achieve a substantial increase in the cur- rent surplus. It is clear however that if, as is the government's inten- tion, the rate of increase in prices and wages in the next several years is sharply curtailed, the yield of direct taxes cannot be expected to grow as rapidly in the future as in the past. - 19 - Table 3 FUNCTIONAL COM,TOSITION OF PUBLIC SECTOR EXPEIDITURE,a/ 1965 (Percentage) 1965 General Services General administration 5.8 Security and special budgets 18.5 Police and justice 2.1 Community services n.e.s.i/ 4.6 Total 31.0 Social services Education, culture, religion 13.5 National Insurance and social welfare 7.5 Health 3.8 Housing 6.4 Total 31.2 Economic services Agriculture and water development 8.1 Industry, mining and quarrying 2.9 Transportation and communications 7.5 Other economic services 1.5 Total 20.0 Unallocable services Interest payments 7.0 Debt redemption 8.5 Miscellaneous c/ 2.3 Total 17.8 Grand Total 100.0 a/ Excluding current outlays of public sector enterprises, such as the Post Office, Israel Railways, the ports and mu- nicipal waterworks, but including the expenditure of the National Insurance Institute. b/ Not elsewhere specified; mainly municipal services rsuch as sanitation, sewerage, fire protection, and street lighting), and also direct immigration services and general research. c/ Mainly subsidies on imported commodities. Source: Bank of Israel: Annual Report 1965. - 20 - FUNCTIONAL COMPOSITION OF GOVERNMENT EXPENDITUREA 1965 (IL million) 1965 Interest Pur- and chases Current debt on Credit Total outlay redemp- capital granted outlay tion account General services General administration 146 -- 18 3 167 Security and special budgets 905 -- -- -- 905 Police and justice 98 -- 6 -- 104 Community services n.e.sh/ 30 -- 1 7 38 Total 1,178 -- 25 10 1,214 Social services Education, culture, religion 360 -- 5 43 408 National Insurance and social welfare 318 -- 4 -- 322 Health 139 -- 13 2 154 Housing -- -- -102 312 302 Total 817 -- 12 357 1,186 Economic services Agriculture and water development 177 -- 52 8o 309 Industry, mining, electric power 40 -- 1 95 136 Transportation and communications 42 -- 260 14 316 Other economic services 47 -- 1 20 68 Total 306 -- 314 209 829 Unallocable servicqs Debt redemption -- 336 -- -- 336 Interest paymelts -- 239 -- -- 239 Miscellaneous 188 -- -Sc/ 1 184 Total 188 575 -5 1 759 Grand total 2,490 575 346 577 3,988 a/ Excluding current expenditure of the postal and transportation enter- prises, but including transfers to local authorities and total expenditure of the National Insurance Institute. b/ Not elsewhere specified; mainly the broadcasting service and general research. c/ Decrease in inventories. Source: Bank of Israel: Annual-R'rt:::rt, io - 21 - 55. This is recognized in the Sudget for 1967-68 where total reve- nues are estimated to rise by 5.6 per cent and the proceeds of the income tax by only 8 per cent as compared with almost 30 per cent in the 1966-67 Budget and an actual increase of over 20 per cent in 1965-66. Expenditures can of course also be expected to rise more slowly as wages and prices are stabilized. A wage freeze has been imposed in the public service after the very large increases in wages paid in 1965 and 1966, and the increase in current expenditures budgetted for 1967-68 is only 8.2 per cent. But in the longer term it will clearly be difficult to restrain expenditures to the required extent. Defense expenditures could rise sharply depending on political developments. Spending on education and to a lesser extent health services must rise with the growth of population and as government assumes an increasing responsibility for these services. Tentatively, the author- ities envisage that over the next four to five years government revenues might rise by 10-11 per cent annually and current expenditures by about 7 per cent-annually. On this basis, revenues in-1970-71 would total approxi- mately IL 5 billion and current expenditures IL 4.2 billion producing a current surplus of IL 800 million, three times that achieved in 1965-66. $6. These assumpintions, however, could well prove optimistic. Cur- rent revenues have risen by nearly 22 per cent annually in recent years, but wages and prices also rose by 12 per cent and 8 per cent respectively. A 10-11 per cent growth of revenues, assuming price stability and a 6 per cent annual growth of output, would require a rise in the ratio of taxa- tion to GNP from 27.5 per cent in 1965 to about 32 per cent in 1970-71. This would mean twice as fast a rise in this ratio as in the period 1960-65. To achieve such an increase would require a considerable degree of auster- ity in Israel as would a growth in government current expenditures of only 7 per cent annually. In recent years current expenditures have risen by 23 per cent annually, though admittedly a large part of this rise has re- flected sharp increases in salaries in the public service. On the whole, however, it is perhaps unlikely that as rapid a rise in the current sur- plus as the authorities hope for in the next several years will be achieved. 57. In the 1967-68 Budget, the current surplus at IL 252 million is 17 per cent smaller than that budgetted in 1966-67 and slightly less than that realized in 1965-66. On the other hand capital expenditures in the 1967-68 Budget at Il 1,233 million are almost 40 per cent greater than the 1966-67 estimate though only 20 per cent above actual expenditures in 1965-66. The drop in planned expenditures in 1966-67 reflected declines in spending on important infrastructure projects particularly the National Water Carrier and the new ports of Ashdod and Eilat on which construction was virtually completed and also a reduction in the provision for housing with the drop in immigration. As the recession has deepened, however, the government has felt compelled to step up capital expenditures as a counter- cyclical measure. This is reflected in the budget proposal for 1967-68. The current surplus in 1967-68 would cover only a quarter of budgeted capi- tal expenditures and substantial increases in domestic and foreign borrow- ing are planned. While complete figures are not available to project the extent of dependence on external assistance of the public sector as a whole in fiscal 1967-68, on the basis of the central government budget alone a decline seems unlikely. - 22 - 58. With regard to the direction of capital expenditures by govern- ment in the future, firm projections are available only for the fiscal year 1967-68. The capital development budget of the central government is prepared en an annual basis, and no overall plan for the public sector covering a period of years is prepared. Longer-term plans are, however, prepared by the respective authorities responsible for electric power, transport, water and major mining and industrial ventures in which the government has large financial interests. At the mission's request, de- velopment budget estimates were prepared for the years to 1967-72. (Appendix Table No. 21). These show no significant increase in spending over the five-year period in contrast to an increase of about 40 per cent between 1962-63 and 1965-66 and are probably conservative. Estimates were prepared also for the transport and power sectors, part of the financ- ing of which would involve calls on the central government. 59. As estimated capital expenditures for the years after 1967-68 are tentative - in a number of cases the necessary studies on which in- vestment decisions must be based have not yet been completed - comments on the future direction of investment must also be tentative. Broadly speaking, however, there is likely to be some shift in emphasis away from infrastructure development towards greater spending on directly productive projects and ones which will have a more direct impact on export perform- ance. Although spending on infrastructure as a whole will absorb a smal- ler share of total development spending, reflecting mainly a sharp reduc- tion in port investment referred to above, expenditures on roads, the railway and electric power will all be higher than in the past five years. This shift in priorities seems appropriate in view of the expected expan- sion of road and rail traffics and of the projected growth in demand for electricity (estimated at 8-9 per cent p.a.). The increased expenditures on mining and minerals relate primarily to the construction of a new re- finery at the Timna copper mine, the doubling of capacity at the Dead Sea Works, the construction of a new ammonia plant by Chemicals and Phosphates, and the new Arad chemical complex to produce phosphoric acid, magnesia and possibly complex fertilizers at a later stage. In these projects govern- ment will finance only a part of the planned investments, with the balance being provided by private partners, suppliers credits and other sources. The increased provision for industry consists of additional loan capital to be made available to industrial enterprises both directly and through - the Industrial Development Bank. Expenditures on irrigation will be some- what reduced by comparison with the past while planned expenditures in agriculture are higher. The justification for the latter is not apparent nor for the large increase in planned expenditures on housing in view of the lower level of immigration and some over-supply of housing in the past two years. Much of the housing financed by government is, however, in de- velopment areas and the government continues to place a high priority on the dispersal of the population. The increase of about 50% in the provi- sion for housing in 1967-68 is no doubt partly related also to the desire to expand employment in the construction industry. - 23 - 60. As stated above, the surplus on current account is expected to cover only a quarter of budgeted capital expenditures in 1967-68. Domes- tic and foreign borrowings are scheduled to rise by 47 per cent and 28 ,r cent respectively by comparison with the borrowing budgeted for 1966- 67 In later years it seems likely that contrary to current estimates government development expenditures will rise, and although the current surplus should also rise it will clearly require a major effort to mobi- lize additional domestic resources if the extent of dependence on external aid in financing the development budget is to be substantially reduced. VII. THE BALA14CE OF PAYMENTS 61. The growth of the Israeli economy over the past several years has been characterized by continued dependence on foreign resources. Since 1963, when the last devaluation took place, imports of goods and services have amounted to 35-40 per cent of GNP, and their rate of expansion has been on average about 8 per cent per annum, close to the rate of growth of real output. In the same period exports expanded more quickly, by about 1$ per cent per annum but the deficit on goods and services account widened and in 1965 it amounted to over half a billion U.S. dollars (Appendix Table 22). In the course of 1966 the current account deficit narrowed as a result pri- marily of the slow expansion of merchandise imports (2 per cent) related to the slackening of economic activity, while exports increased by 17 per cent. 62. No major change has occurred over the last three or four years in the pattern of financing the current account deficit. Transfer payments from abroad, mostly to private groups or institutions have represented a steady flow amounting each year, since 1961, to $340-350 million (Appendix Table 24); they are composed primarily of personal restitutions from the Federal Republic of Germany and remittances from Jews living outside Israel, half of which approximately is channeled through Jewish institutions, the other half directly to Israeli citizens. Government receipts in the form of reparation payments from the Federal Republic of Germany have been declining over the last several years and came to a stop in the second half of 1965; this has been the major element accounting for the slight decline in transfer payments in 1966,-which, however, still amounted to some 300 million. 63. Net capital inflow in the form of loans and direct investments averaged between 1964 and 1966 about $240 million pei annum. In 1966 the net inflow was lower because of unusually high debt repayments and also because of a decline in direct foreign investment. Debt repayment amounted in 1966 to $160 million, compared to $150-160 million over the previous two years. In addition, repayment of short-term loans (less than one year) amounted to some $25 million in 1966; the Israeli authorities were reluc- tant to authorize new short-term debts (primarily in the form of suppliers' credit) as a result primarily of the rise in interest rates in most money and capital markets of the world. Repayment and conversion of Independence and Development bonds, which are issued in the U.S. on particularly favor- able ocnditions (normally 4 per cent interest, 12 year maturity) amounted - 24 - to about $115 million in 1966, while proceeds from new issues were some $125 million. As to direct foreign investment, the decline since 1965 is to a large extent the result of the reduced profitability of investments in the stock exchange and in the real estate business. A new set of measures has been recently approved by the Government which aims at en- couraging greater foreign direct investments primarily by enlarging tax concessions and providing grants and credit at subsidized rates for speci- fied types of industrial ventures. 64. As a result of the lower net inflow of capital, a loss in foreign reserves of about $20 million 1/ was registered in 1966. This very moderate loss compares with a continuing accumulation of foreign assets over the past eight years as a result primarily of the very sizeable and continued capital inflow. At the end of 1966 the foreign reserves of the Bank of Israel amoun- ted to $613 million 2/ compared to about $100 million in 1958. 65. The Israeli authorities are aware of the fact that, although the large inflow of capital experienced so far is not likely to decline over the next few years, the growth prospects of the economy in the long run will rest to a large extent on the possibility of achieving a greater de- gree of independence from foreign borrowing. The devaluation of 1962 was in fact intended to provide a major stimulus to reduce the trade gap and improve the competitive position of Israeli products vis-a-vis foreign pro- ducers. However, the initial advantages provided for by the devaluation were soon offset by steep increases in the prices of most Israeli products. One factor accounting for the inflationary pressures experienced over the last four years was the devaluation itself since a number of Israeli pro- ducts have a high import component. 66. It seems clear that future efforts to reduce the trade gap will have to be concentrated particularly on raising exports. Import substi- tution has already been pushed very far and production of several commodi- ties is not economic. Despite efforts to accelerate import substitution and as a result of the changed composition of demand, dependence on imports increased considerably over the three or four years preceding the 1962 de- valuation, when the import coefficient of total demand amounted to 29 per cent. Export products showed the highest import component (about 45 per cent) due largely to the considerable weight of raw diamond imports. After a decline in 1963 as a result of the devaluation, the import component of most products rose again in 1964 and to a lesser extent in 1966. 67. In agriculture, as discussed before, efforts are concentrated on crops which can be profitably exported, while more heavy reliance than in the past is expected on imports of certain other copmodities (such as sugar and meat) for which production conditions at home are not advanta- geous. Industrial imports have been boosted by some liberalization meas- ures which were taken in 1962, and which affected particularly durable consumer goods. However, very heavy protective tariffs and purchase taxes on most industrial products have compressed demand for many products (par- ticularly consumer items) and prevented imports from soaring. 1/ Preliminary. 2/ Net reserves of the banking system amounted to $560 million equivalent to nine months' commodity imports or five months' total imports in 1966. - 25 - 68. Major steps to liberalize imports further and reduce tariff protection are not envisaged for the immediate future; concrete steps in that direction are to be closely related to the possibility of realizing, at the same time, major export gains. Dependence on imports for food pro- ducts may increase over the next several years as a result primarily of the constraints which will be met in expanding agricultural production and at the same time by the rising demand for high value food items such as meat. In manufacturing, the import component may decline slightly as diamonds become a smaller share of total output and as Israel develops further its own natural resources such as potash and phosphates. 69. Export performance was satisfactory in the past. Since 1963 total commodity exports increased by 15 per cent; a much lower growth rate was registered in 1964 due primarily to an unfavorable citrus crop, but in 1965 and 1966 substantial increases (of 15 per cent and 17 per cent respectively) were registered. Agricultural exports, more than three-fourths being citrus, increased since 1963 at an average annual rate of 11 per cent, compared to a 16 per cent increase in industrial exports; the share of agricultural exports in the total export of com- modities has therefore been declining and is now less than 20 per cent, 1/ 70. The prospects for the further growth of agricultural exports were discussed earlier. It was concluded that the proceeds of agricul- tural exports might well exceed the target of $120 million in 1970, set by the Israeli authorities two years ago, and achieve a growth rate of 9-10 per cent per annum. 71. Given the limited scope for expanding agricultural exports, efforts have been made by the government to raise industrial exports. The measures include: the establishment of export funds, partially fi- nanced through the government budget, to provide credit to export orien- ted industries; the subsidization of exports through equalization funds to be financed by levies imposed on goods marketed in Israel and the sub- sidization of interest rates applied to export credits. In 1966 new ex- port subsidies were added, ranging between 3.5 and 8.5 per cent according to the value added of the exported commodity. 72. Total industrial exports increased at an average of 16 per cent per annum between 1963 and 1966, to reach $380 million last year; however, diamond exports, in which value added accounts for just over 20 per cent contributed $165 million in 1966. The growth of industrial exports over the last several years has undoubtedly been sustained by the large amount of incontivcs given to producers; however, profitability of exports has most probably declined soon after the 1962 devaluation and the booming domestic market has been much more attractive to most industrial producers. 1/ Agricultural exports amount to almost one half of industrial exports excluding diamonds. - 26 - It is therefore understandable that the Israeli authorities attach great importance to the stabilization of domestic prices and compression of pro- duction costs as a prerequisite to a further expansion of the traditional industrial exports such as processed foodstuffs, textiles and clothing, potash, phosphates and other minerals and chemicals. However, the develop- ment of new export industries for which Israel can reasonably expect to enjoy comparative advantages in foreign markets will be needed if future dependence on imports is to be reduced. The prospects for industrial ex- ports have been discussed earlier. A growth rate of 16 per cent annually in the next four to five years is foreseen. 73. No major changes have been registered in most recent years in the geographical pattern of Israel's external trade. The U.S. remains the single most important market for Israeli products as well as the sin- gle major supplier of goods. EEC countries as a whole, however, now pur- chase from Israel more than any other single country and absorb about 30 per cent of total Israeli exports. Since 196h Israel has had a commer- cial agreement with the EEC whereby only some minor exports to Coinon Market countries have enjoyed tariff reductions. More recently, Israel has made an application for associate status to the EEC, which has the nattor under considoration. 74. Gross income from tourism grew slowly over the last three years (about 3 per cent per annum to almost $60 million in 1966) but a higher growth rate may be expected over the next several years as a result of a greater promotion effort by the government and further development of tourist facilities. However, the high prices of goods and services in Israel is a strong limiting factor to the growth of tourism. Earnings from transportation which is the major source of service revenues, ($165 million gross or $60 million net in 1966) increased substantially over the last several years as a result inter alia of the recent coming into opera- tion of new ships and airplanes and further growth is expected to take place in the years to come. For services as a whole, however, Israel has been consistently running a deficit for many years past primarily on ac- count of services to the government, and for interest and dividend pay- ments; on average the deficit over the period 1963-66 amounted to close to $125 million per annum. - 27 - VIII. PROSPECTS AND CONCLUSIONS 75. In formulating the economic outlook for 1967, (included in the 1967 National Budget) the Israeli authorities forecast that real output would grow by nearly 5 per cent. Industry would grow more quickly while expansion in most other sectors would be close to the average growth rate, though in construction output was not expected to rise above the 1966 level. Investment was expected to rise by only 1 per cent but this would mean a reversal of the sharp downward trend of the past two years. Indus- trial investment was expected to rise by nearly 15 per cent in contrast to a decline of 25 per cent in 1966. Exports of goods and services were fore- cast to grow by 13 per cent, and imports by 6.5 per cent, which would mean a further reduction in the deficit on current account. 76. No longer term projections for the overall growth of the economy have yet been formulated. Sector programs, e.g. in agriculture, manufac- turing industry, transportation, and electric power have been or are being prepared and it is the intention that these should be integrated by the Economic Planning Authority into an overall framework for development to cover a period of four or five years. The five-year plan model 1965/66 - 1969/70 (discussed in the previous Bank economic report) was never accep- ted by the government, and in fact, government policies in the past two years have been such as to make the targets of the plan impossible to attain. 77. As indicated in earlier sections of this report a stated objective of the government is to reduce the size of the current deficit of the balance of payments. When the sectoral plans are integrated into an over- all development program the implications for the balance of payments of various possible growth rates are to be considered, and the government is expected to choose a target rate of growth which will presumably imply a narrowing of the current deficit. 78. On the basis of this policy objective, and having regard to the export projections discussed with the Israeli authorities, the mission considered the implications for the growth of output of a narrowing of the current deficit. In the absence of firm investment programs any projection of output can only be illustrative, but on the basis of plausible assumptions about the growth of the principal components of demand and of their import component, a current deficit in 1970, excluding net payments of interest and dividends, of the order of $350 million ($100 million less than in 1965) would be consistent with a growth in output of 5-6 per cent annually over the period 1966-70. The figure of $350 million is not, it must be emphasi- zed, an official target. It represents in fact rather a modest objective in terms of narrowing the deficit; however, the smaller deficits tentatively suggested by the Israeli authorities would most probably mean a lower rate of growth of output. - 28 - 79. A growth rate of 5-6 per cent in GNP, though satisfactory by comparison with growth in many other countries, would be considerably lower than the average growth rate achieved in Israel over the last fifteen years. However, apart from the desire of the Israeli authori- ties to reduce their dependence on foreign capital there are other factors, independent of Government policies, which point to a lower rate of growth of the economy in the next several years. One of these factors is the slower increase in population which is probable as a result of the drop in the rate of immigration; net immigration actually stopped in 1966, compared to a net inflow of 40 to 50 thousand each year from 1960 to 1965 and an average of about 60 thousand per annum since 1948, and the outlook for the next several years is uncertain. Another factor which will contribute to a reduced rate of growth of the economy is the slower expansion of agricultural output, discussed in Chapter III, as a result of the limits on resources available in the sector. 80. Two critical factors in achieving a 5-6 per cent growth of output and a smaller current deficit are the growth of exports and of domestic savings. The projected growth of agricultural and industrial exports is as shown in Appendix Table 28. The growth targets of agri- cultural exports (principally citrus), mine products (principally phosphates and copper) and potash seem reasonable in view of the expected increase in orange output and planned investments in new production capa- city for potash, phosphates and copper. Success in expanding diamond exports to the extent predicted will depend upon Israel capturing a larger share of the world diamond cutting trade. The targets for other industrial products are ambitious and depend in part on Israel's success in developing new products where the time required to establish production facilities and markets is difficult to predict. The achievement of the commodity export targets and the predicted increase in earnings from invisibles, particularly tourism and transportation services, will be determined also by future trends in wages and costs in Israel in relation to the exchange rate and by the success of government policies in restraining domestic demand. Even if the government is successful in greatly reducing the inflation of wages and costs, some further export incentives would seem necessary if the export targets are to be achieved. 81. The second major uncertainty relates to the increase in domestic savings. In recent years the average savings rate in Israel has been declining. With the relatively high level of personal consumption it is by no means clear that the required increase in savings will be realized. However, reserves for depreciation have risen steadily in the past five years and, partly as a result of proposed new tax concessions, it is conceivable that depreciation reserves might reach a level by 1970 equal to about two-thirds of the required level of gross domestic saving. The trend of public and personal savings has been disappointing and it is in these fields that serious efforts will have to be made if the required increase in savings is to be realized. The authorities should probably aim to achieve a savings rate of not less than 1-1 per cent of GNP, only moderately above the average level of 13.8 per cent achieved in 1960-65. - 29 - 82. While some narrowing of the current deficit is in prospect, economic policies and growth targets for the next several years will have to be set in relation to the expectations on the inflow of capital, and it is clear that Israel will continue to rely on substantial aid from abroad in the foreseeable future. The mission discussed with the Israeli authcr- ities their expectations concerning the inflow of capital from various sources over the next five years. As already indicated they expect the total capital inflow to rise somewhat in 1967, and there are no indications at present that the magnitude of the capital inflow in later years will be sharply reduced. 83. In the light of policy statements and projections made by the Israeli authorities, it would appear that unilateral transfers and direct foreign investment would be sufficient to cover the current deficit in the next few years, including net interest payments. Unilateral transfers, namely private restitution payments from the Federal Republic of Germany and private and institutional remittances from abroad, are expected to remain at least at the level of 1966. Restitution payments might, however, rise as a result of a recent German law which enlarges the number of Israeli citizens eligible for such payments. Foreign investments in Israel are expected to increase over the 1965-66 level, primarily as a result of the measures taken recently by the government to make foreign ventures in Israel, mostly in the industrial field, more attractive. Unilateral trans- fers and direct foreign investments can be expected to amount, over the next several years, to a total in excess of $00 million per annum. 84. There is sone uncertainty about the total of debt repayments. According to the projection given in Appendix Table 2, loan repayments will amount to $75 million in 1967, but the official balance of payments projection for 1967 gives a substantially higher figure, of $130 million. Part of the difference is accounted for by Development Bond conversions into new issues and part by the repayment of Bonds in Israeli pounds. Neither of these items are shown in the debt service projection in Appen- dix Table 2. After taking then into account, however, there remains a discrepancy which may represent repayment of private non-guaranteed debt. 85. Even with the fairly heavy debt maturities over the next few years, it would seem that Israel has good prospects of obtaining an ade- quate inflow of foreign capital from various sources. A large part of the total is expected to be available from the sale in the U.S. of Israel Development Bonds. Bond sales are projected at more than $100 million in 1967, and the Israeli authorities expect that sales could further increase by 5-10 per cent per annum in the subsequent 3 or 4 years. Additional borrowing will also be required; there are various sources of foreign capital available to Israel, but not all of them are as dependable as sales of Development Bonds and the extent of these borrowings will of course be adjusted according to the needs prevailing at the time. The inflow of capital from the U.S. Government (PL 480, AID and Export- Import Bank), which has been declining over the last three years and amounted to $40 million in 1966, may continue to decline in the future. In 1966 Israel made an agreement with the Federal Republic of Germany for a $40 million loan, for 25 years at 3 per cent interest, and there is a possibility of further loans from the Federal Republic on similar terms in the next few years. Other sources (such as privately placed debt, suppliers credits) provided on average $105-110 million over the past three years and no change is expected in 1967. - 30 - External Public Debt 86. Israel's total external medium and long-term public debt in September, 1966 amounted to $1,050 million. Short-term loans repayable in foreign exchange at the same date totalled just over $100 million. Total debt amounted to rather less than twice the country's foreign exchange reserves. Service on the debt in the next four years fluctuates sharply as a result of repayments due on Development Bonds. A peak of $142 million is reached in 1969, but the debt service drops to $80 million in 1970. Average service payments on the public external debt over the next four years would equal 12 per cent of export earnings in 1966. Assuming that foreign exchange earnings will rise by 14-1 per cent annually, and that Israel will borrow on long and medium-tern the amount indicated in paragraph 85, the ratio of debt service to foreign exchange earnings in 1970 might approximate 10 per cent. In view of the high degree of stability in Israel's income from unilateral transfers it is reasonable to take them into account also in estimating the resources available to meet debt service obligations in the next few yars. If these are added to gross foreign exchange earnings, the ratio of scrvice payments to Israel's disposable foreign exchange income would be about 8.5 per cent in 1970. There seems no reason to doubt that Israel will be able to meet its debt servicing obligations in the next several years particularly as the heavy repayments due on Development Bonds in 1969 can most probably be offset by expanded bond sales at that time. STATISTICAL APPENDIX TabAL No. 1. External Medium- and Long-term Public Debt Outstanding as of December 31, 1965 with major reported additions to September 30, 1966 2. Estimated Contractual Service Payments on External Public Debt: 1966-80 3. Resources and Uses: 1960-66 4. Net Domestic Product and National Income at Factor Cost 5. Gross Investment at Current Prices 6. Investment and Saving at Current Prices 7. GNP, National Income and Private Disposable Income at Current Prices 8. Consumer Price Index 9. Index of Average Monthly Wages 10. Output of Selected Agricultural Products 11. Industrial Production Index 12. Money Supply 13. Credit by the Banking System, by Sectors 14. Increase in Financial Assets of the Public 15. Internal Government Debt 16. Summary of Government Budget 17. Ordinary Government Revenue 18. Ordinary Government Expenditure 19. Grants and Loans Received by the Government 20. Capital Expenditure of the Government 21. Projected Government Capital Expenditures 22. Balance of Payments 23. Receipts and Payments on Invisible Account - 11 - Table No. 24. Transfer Payments 25. Commodity Composition of Exports 26. Commodity Composition of Imports 27. Direction of Trade 28. Export Projection 29. Import Component Final Demand Table It ISRAEL - EXTENAL MEDIUY- AD LONr-TEM /1 DEBT OUTSTANDING INCUDING UNDISBURSMD AS OF DECDMER 31, 1965 WITH MKJR REPORTED ADDITIONS JANUARY 1 - SEPTIMER 30, 1966 Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Debt outstanding Major reported December 31, 1965 additions Item Net of Including January 1 - undisbursed undisbursed September 30, 1966 TOTAL EXTERNAL DEBT 9j,522 i1,08,861 13 67 TOTAL EXTERNAL PUBLIC DEBT 866,387 943,561 13,167 Publicly-issued bonds 531,82h 531,824 - Privately-placed debt 872620 89,757 Suppliers' credits 62122 63,12 Other _2 E9 2677- IBRD loans 64,02h 94,T 1- U.S. Government loans 1691371 213,937 13,167 Export-Import Bank 53378 614S87 Other 11, 993 152 E 13,107 AID f,993 - 157,5U 5-667- Dept. of Agriculture - - 7,500 Loans from western governments 13 548 13 902 - Canada 1.942 1P942 France r.33 7,035 Germany 1 92- TOTAL EXTERNAL PIVAT3 DEBT /2 91,135 105,300 Privately-placed debt 88 855 98 353 Suppliers' credits 6B866 7? Other 19,69 U.S. Government loan (AID) 21000 6,667 Loan fron France 280 280 - /1 Debt with an original or extended maturity of one year or more. 7T Guaranteed as to transfer of exchange only. Statistics Division 1BRD-Economics Department January 13, 1967 Tabl. 2: ISRAEL - 1MTIMTED CONTRACTUAL SERVICE PAYIENTS ON EXTERNAL MEDIUM- Al LONG-TERI DEBT .OCTTANDING INCUDING UNDISBURSED AS OF DECZ BER 31, 1965 WTH MAJOR REPORTED ADDITIONS JANUARY 1 - SEPTEBER 30, 1966 A Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Page 1 TOTAL EXTERNAL DEBT DEBT CWST (EMIN OF PERIOD) PAYMEh"IS DURIAG ?ERIOU YEAR INCLUI1G AYORTI- UNDISBURSED ZATION INEREST TOTAL 1966 1,037,537 113,813 28,298 22,111 1967 938-,917 74,1hO 28,100 102,240 1969 873,75b 74,so 25,756 99,89L 1969 808,c85 120,077 22343 1h2,b20 1970 695,74o 60,695 19j279 79,573 1971 641,990 65,9L5 17,650 83,56 1972 582,065 69,779 15,95.6 85,736 1973 517,313 69,6L? jt,304 83,946 1974 451,628 53,299 12,589 65,886 197$ L01,916 36,51 10,91 LY,856 1976 368,562 80,2h1 9,317 59,557 1977 290,46 97,816 7,867 105,683 1978 192,631 42,b02 6,423 48,825 1979 150,229 49,067 5,307 54 373 1980 101,162 43,790 3,405 47,195 EX.TERNAL PUBLIC. DEMT- TOTAL DEBT CUTST (BEGIN CF PERICO PAYMErTS CURING PERIC0 INCLUCING__ ANORTI- YEAR UNCISEURSED ZATION INTEREST TOTAL 1966 1-368 36 S4fl_1 25 1139 1967 a59m115 58,001 23,216 81,217 1968 21t0a92 6c,21C ?,016 82j285 1969 758,293 111,063 19,476 130,539 1970 _654962 53,986 17,0CC 70,966 1971 607,921 55,973 !S,791 75,764 1972 _ 53.a9_6 6.1628 -1C-_4,476 1,6E6 1973 495,785 65,60E 13,160 78,768 -1 1 a7-- ----1-3-C- -------- 61,C36 1975 398,386 34,009 LC,248 44,257 -197&. .357t?6.E,9 31 -,831 -872753 1977 231,167 97,026 7,47E 1978 -1184sl 41,26E. S,GE5 __ 353 1979 142,873 471881 5,015 52,895 -198 -- 96992.s249y 3.177 46l Table 2: ISRAEL - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON E(TERNAL MEDIUM- AND LONG-TERI, DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1965 WVH MAJOR REPORTED ADDITIONS JANUARY 1 - SEPTEMBER 30, 1966 /1 (COT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Page 2 PUBLICLY-ISSUED BCNDS /2.. CEBT CUTST (BEGIN CF PERIOD) PAYMENTS CURING PERIOD INCLUCING AMORTI- YEAR UNDISBURSED ZATION INTEREST TCTAL 1966 531,824 65781 973 59 751140 1967 475,569 28,681 8,648 37,329 1968 A558 _1112111112-5 8 6 35, 5C1 1969 437,311 791938 7,320 87,258 1970 365,105 272966,127 33_423 1971 344,753 32,432 6,0C4 38,436 193 318,341 35520 5,80EQ_ _ 4-1_4C0 1973 287,848 39,159 5,757 44,916 1974 25 2564_ _25Q1 _ 53,450 -_- -3Q 551 1975. 231,132 13,149 4,943 187092 1976 221kt511_ 5E 41853 63t294 1977 164,720 80,930 3,685 84,615 1978 83*790 2_51005 2_851-27-,B56 1979 58,785 31,342 2,351 33,693 - PRIV.-PLACED DE8T - TCTAL- DEBT CUTST (BEGIN CF PERIOD) PAYMENTS DURING PERIOD - -------INCLUDING A_ORTj- YEAR UNDISBURSED ZATION INTEREST TOTAL 1966 89,757 18,886 41831 23 _T1 1967 70,870 16,094 3,926 20,019 1968 54077 14,846 31 1969 39,931 11,751 2,232 13,G92 197.0 128181_ _6,186_ 1,614 7.tCO 1971 21,994 5,486 1r276 6,762 1972 16t508 5,46C 952 6*413 1973 11,047 4,805 641 5,446 ~1974 ___ -6-43---96-3-6_3--71 1975 2,847 1,041 161 1,2C2 _1976 ----------1D --- IL 512 1977 1,404 401 85 486 1978 1903 401 59 460 1979 602 401 33 434 1980 __ 201 __ 201 1 27 See footnotes at end of table. Table 2: ISRAEL - ESTIATED CONTRACTUAL SERVICE PAYIENI'S ON EXTERNAL MEDIUM- AND LONG-TERM DBT OUTSTANDING INCIUDING UNDSIBURSED AS OF DECEMBER 31, 1965 WITH MAJOR REPORTED ADDITIONS JANUARY 1 - SEPTEMBER 30, 1966 A (coNT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Page 3 ------------------SuPPLIERSCEDis------------- DEBT CUTST (BEGIN CF PERIOD) PAYMENTS CURING PERIOD I NC LUQ ING AMD3Jl- YEAR UNDISBURSED ZATION INTEREST TCTAL 1966 6 a182 12703 369 _ _ 6,012.- 1967 50,479 10,096 2,779 12,875 1968 40,383 ----- 22-0__-2-232___ -11452 1969 31,163 7,432 1,727 9,159 1970 2330---__-,54--___1,338 6,886 1971 18,182 5,085 1,034 6,120 A1 2 1 3PQ9l5r 0.9 Ill 5s 791- 1973 8,038 4,403 452 4,856 1914_ ___,635---2,995 153m_ 3,14L 1975 640 640 24 664 PRIVATELY- PLACED DEBT - OTHER DEBT OUTST (BEGIN CF PERIOC) PAYMENTS DURING FERICO INCLUCING ANCRTI- YEAR UNDIS-URSED ZATION INTEREST TOTAL 1966 26,575 6,184 1,462 7,645 1967 20,391 5,998 1,147 7,144 1968 141394_ _ f_5 811 - - 644 . 1969 8,769 4,318 505 4,823 1910 4450 _ 638 275 914 1971 3,812 401 241 643 1972 3,411 401 215 616 1973 3,010 401 189 590* 1974 ____21608 401 163 564 1975 2,207 401 137 538 1976 1,806 401 1ll 512 1977 1,404 401 85 486 1978 1,003 401 59 460 1979 602 401 33 434 1980 201 201 7 207 See footnotes at end of table. Table 2: ISRAEL - ESTIATED CONTRACTUAL SERVICE PAYMENTS ON EKTERNAL MEDIUM- AND LONG-TERMI DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEBSER 31, 1965 WITH MAJOR -REPORTED ADDITIONS JANUARY 1 - SEPTEMBER 30, 1966 A (coNr.) Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Page 4 DEBT CUTST (BEGIN CF PERICD) PAYMENTS DURING PERICD ------- CINLUQIN- A? J----------------------- YEAR UNDISBURSED ZATION INTER5ST TOTAL 1966 9AiAl L1,6 35 - 2_34 4s3 5-9 1967 92,506 3,774 4,729 8,503 196B ---------88B3-5 2SA 5---------9 e 1969 83,703 5,311 4,644 9,955 19---------- 18392_ 3 Q --------- 995 7 1971 72,775 5,936 4,017 9,953 19SiC.16,d3 t6t19 3*678 9*9 5 l 1973 60,560 6,633 3,319 9,952 19 - 5329215_ 29A 9----------55 1975 46,912 7,419 2,539 9,958 1976- --39 ,A93- 1,8 _ 2,1.13- _ 9E99 - 1977 31,647 5,042 1,1711 6,753 .L918.- 2.6r6Q5 ,SlE A 42tL .6, 14 5 1979 21,287 5,625 1,126 6,751 190------151662----All2. BC9.-----5,58a1 US _GOVT. lANS -_TO.TAL DEBT CUTST (BEGIN CF PERIOD) PAYMENTS CURING PERIOD INC LUC .I NQ AYQR_TI- YEAR UNCISEURSED ZATION INTEREST TOTAL 1966 213,937 7,713 5,287 13,CC1 1967 211,890 8,731 5,524 14,255 1968 203,159 j2,625 5,298- _ ,924 1969 190,534 13,293 4,963 18,255 1971 163,150 15,295 4,254 19,549 1972_ _ -_ 1-7.T855 1e 1-09t9 _765 18 ,864 1973 132,757 14,130 3,283 17,413 1974 --------118? 2 9 2, 880 --------15789 1975 105,718 11,454 2,533 13,9E7 1976_ _94264 ___10s68~ 2,260 _ 13126 1977 83,396 IC1653 1,998 12,651 1918 ___5k,t3 -A 1,74 1 t 2,29L- -1979 62,199 10,513 1,505 12,017 19.80 ---------51. t6.0 _ 515 1 63 8---------1838 Table 2: ISRAEL - $STIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERNAL MEDIUM- AND LONG-TERM DEBT OUTSTANDING INCLUDING UN1DISBURSED AS OF DECEMBER 31, 1965 WITH MAJOR REPORTED ADDITIONS JANUARY 1 - SEPTEMBER 30, 1966 /1 (CONT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Page $ --- --------SD-AN EXIM DEBT OUTSTj (BEGIN CF PERIO) PtYMENTS CURING PERIOD ICLI A--------------- YEAR UNCISBURSED ZATION INTEREST TCTAL 1966 61A8 5 94 391-.1C1 4 155 1967 56,393 6,030 3,092 9,122 1968 50., 363-----1,63__ 2-2.1 10,184. 1969 42,900 6,1727 2,317 9,044 41970 36,113-_----4-4 1,94 - -8,415 1971 29,707 6,411 1,588 7,999 192_ __Zx96 6.149 1.23671385 . 191.3 17,147 5,141 894 6,035 1914 1 _--aff3_ _-_-31---- t5 1975 8,123 2,389 427 2,816 1976 52l?-----1-309 187 1977 4,456 1,005 240 1,245 _1978 3m51 837 185 Lt2 8 1979 2,614 747 139 886 1980 131_____1&1 ..97----_ ---844 US GOVT. LCANS - OTHER DEe_T OUTST (BEGIN CF PERICE) PAYMENTS CURING PERIOC INCLUDING AMORTI- YEAR UNCISBURSED ZATION INTEREST TOTAL 1966 _152,450 1 2619 2,186 4 06 1967 155,497 2,701.. 2,432 5,133 -1968 __152.t 9-- 5.62 _2, 517-_--_ -_-1.7A C- 1969 147,634 6,566 2,646 9,212 190 1,08 2,691 ---------10jt315- 1971 133,443 8,884 2,666 11,550 1972. 124t5 95,.9.52,519 ___ 1,479 1973 115,610 8,989 2,389 11,378 1974 1062_ _ 2,249 _____11,275 1.975 97,595 9,065 2,1C6 11,171 .1976 _8ai353Q---5591 1s951. __11,541 1977 78,940 9,648 1,1758 11,406 1978 (z92 910 T.563.. - 11.270 1979 59,585 9,766 1,366 11,131 1980_------.49,820-----352 1,166~ _._10 1994 Table 2: ISRAEL - ETIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERNAL MEDIUM- AND LONG-TERM DIBT OUTSTANDING INCLUDING UWDISBURSED AS OF DECEMBER 31, 1965 WITH MAJOR REPORTED ADDITIONS JANUARY 1 - SEPTEMBER 30, 1966 /1 (conT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Page 6 0V LQA---------ANz_C[AL . DEBT QUIS_T _ __ (BEGIN CF PERTOC) PAYMENTS CURING PERIOD INLUCIG AERl -------INC ~ ~ ~ _J LUIi5J-------------------------------------- YEAR UNDISBURSED ZATION INTEREST TOTAL 19666___ Jf,977 698 42 1_123. 1967 8,280 721 - 390 1,111 1969 6,814 7710 318 1,C88 .10- 6,04 19.6 2 8 _ 1,076 1971 5,248 823 241 1,064 _9J2!UA,A_ 5 852 2CLL___ _,.C53, 19173 3,573 882 159 1,041 1-974-2-- -2.691 -13 ------11 _. 1-,- 0 29_ 1975 1,178 946 -72 1,018 16 23229 ----------- B6 EXTERI'AL PRIVATE DEBT - TOTAL DEBT CUTS T (BEGIN CF PERI0I PA10MENTS DURIN PERICO INCLU_ING AMERTI- YEAR UNCISBURSED ZATION INTEREST TCTAL 1966 98,901 19,o099 _5vg 1i96 7 79,T02- i86,139 4,2, 1.9§8 . 63,662_ 1 3738 17 608 1969 49,792 9,014 2,867 11,881 1970 40,778 6,70 2,279 8,987 1911 34,069 5,972 1,859 7,832 1972 28,097 6,569 1,480 8,050 1973 21,528 4,034 1,144 5,178 1974 17,494 3j964 887 4,852 1975 13,530 2,932 667 3,599 1976 10,597 1,318 486 1,804 1977 9,279 790 389 1,179 1978 8,490 1,134 338 1,472 1979 7,356 1,186 292 1,478 1980 6170 80C 228 1,028 See footnotes at end of tablp- Table 2: ISRAEL - ESTIMATED CONTRACTUAL SERVICE PAYMENS ON ITERNAL HEDIUM- AND LON-TERM DEB'T OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1965 WITH MAJOR REPORTED ADDITIONS JANUAaY 1 - SEPTEMBER 30, 1966 A (ComT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Page 7 PRIV.-PLACED CEBT - TCTAL DEBT EUTST . (BEGIN CF PERIOD) PAYMENTS DURING PERIOD --__ INCLUCINU _' AMCRTI- YEAR UNCISBURSED ZATION INTEREST TOTAL 1966 - '91,95 19,037 - 5,567 ___ 24,60h 1967 72,917 15,921 4,699 20,620 1968 "--56,995 . 13,870 _ 3-,505 _ 7,375- 1969 43,125 9,014 2,633 11,642 1970 - 349111 6,709 21045 8,754 1971 27.402 5,972 1,626 7,598 1972 21,430 6,569 1,247 7,816 1973 14,861 4,034 911 -4,945 -1974 10,821 3,964 654 4,618 1975 6,863 2,932 433 3,366 1976 3,930 1,318 253 1,570 1977 2,612 523 156 679 1978 2,089 600 119 719g 1979 1,489 653 91 744 1980 836 267 46 312 SUPPLIERS CREDITS DEBT OUTST (BEGIN OF PERIOD) PAYMENTS DURING PERICD INCLUDING AMCRTI- YEAR UNCISBURSED ZATION INTEREST TUTAL 19667- 13,809 j -,356 - 18,165- 1967 -7,168 10,778 3,759 lh,537 1968 66.37a1 .253T291 _8 1969 36,833 6,787 2,299 9,086 1970 30?046 59979 1,821 71,800 1971 24,067 5,367 1,450 6,817 1972 18,701 6,162 1,113 7,275 1973 12,538 3,594 806 4,399 1974 8,945 3,175 580 3,755 1975 5,769 2,205 362 2,568 1976 3,564 1,172 227 1,399 1977 2,392 472 141 612 1978 1,920 564 1C8 672 1979 1,357 637 83 720 1980 .720 188 38 226 See footnotes at end of table., Table 2: ISRAEL - ESTIMTED CONTRACTUAL SERVICS PAYMENTS ON EKTERNAL MEDIUM- AND LOt1G-TERM DE3T OUTSTANDING INCLUDIrD UNDISBURSED AS OF DECEIER 31, 1965 WITH MAJOR REPORTED ADDITIONS JANUARY 1 - SEPTE1BER 30, 1966 A (coNT.)' Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Page 8 PRIV-PLACEL DEBT-OTH5R DEBT OUTST (BEGIN OF PERIG) PAYMENTS URING PERICO INCLUDING AMCRTI- YEAR UNDIS5BURSED LATION INTEREST TOTAL 1966 20,997 5,228 1,211 6,439 1967 15,769 5,143 940 6.083 1968 IC,625 4,332 614 4,947 1969 6,292 2,227 334 2,561 1970 4,065 730 224 954 1971 3,335 605 176 781 1972 2,730 407 134 541 1973 2,322 44C 105 545 1974-1,882 789 74 863 1975 1,093 727 71 798 1976 366 145 26 171 197 220 52. 15 67 1978 169 37r 11 48 1979 132 16 9 24 1980 116 79 8 86 AID LOANS DEBT CUTST IBEGIN OF PERIOD) PMYMENTS DURING PERIOD INCLUCING AMCRTI- YEAR UNCISBURSE0 ZATION INTEREST TOTAL 1966 6P667 90 90 1967 6,667 - 172 172 1968 6,667 - 233 233 1969 6,667 - 233 233 1970 6t &667 - 233 233 1971 6,667 - 233 233 197 6,667 - 233 233 1973 6,667 - 233 233 1974 6,667 - 233 233 1975 6,667 - 233 233 1976 69667 - 233 233 1977 6,667 267 233 500 1978 6,400 533 219 753 1979 5,867 533 201 734 1980 -5v34 533 182 715 see footnotes at end of table. Table 2: ISRAEL - ESTIMATED CONTRACTUAL SERVICE PAYMENTS ON EXTERIAL MEDIUM- AND LONG-TERM DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DECEMBER 31, 1965 WITH MAJOR REPORTED ADDITIONS JANUARY 1 - SEPTEMBER 30, 1966 /1 CONT.) Debt Repayable in Foreign Currency (In thousands of U.S. dollar equivalents) Page 9 LOANS FROM FRA&CE DEBT OUTST (BEGIN OF PERIOD) PAYMENTS DURING PERIOD - INCLUDING AMCRTI- YEAR UNCISBURSED ZATION INTEREST TOTAL 1966 280 62 16 78 1967 218 218 13 231 /1 Includes service on.all debt listed in Table 1 prepared January 13, 1967 except the following amounts for which the amortization terms are not available: Public Debt: U.S. Government loans (Major reported additions) $13,167 Loan from Germany 4,925 Private Debt: Suppliers' credits s600 Other privately-placed debt 1,799 /2 The amount outstanding on publicly-issued bonds reflects the capital appreciation at their redemption value which increases each year. Statistics Division IBRD-Economics Department January 13, 1967 Table 3 RESOURCES AND USES, 1960-66 (In millions of Israel pounds) 1960 1961 1962 1963 1964 1965 1966 Resources and uses at current prices Private consumption 3,096 3,648 4,410 5,247 6,098 7,164 8,081 Public consumption 829 1,030 1,384 1,568 1,755 2,188 2,571 Gross investment 1,218 1,565 2,120 2,319 2,924 2,863 2,506 Total domestic demand 5,143 6,2h3 7,914 9,134 10,776 12,215 13,158 Imports 1,202 1,499 2,690 2,966 3,507 3,635 3,788 Exports 633 744 1,383 1,763 1,917 2,183 2,508 Import surplus 569 755 1,307 1,203 1,590 1,652 1,280 Gross national product 4,574 5,488 6,607 7,931 9,186 10,763 11,878 At 1965 prices Private consumption 4,350 4,811 5,383 5,954 6,619 7,164 7,434 Public consumption 1,359 1,589 1,765 1,881 1,971 2,188 2,300 Gross investment 1,815 2,127 2,416 2,501 3,052 2,863 2,473 Total domestic demand 7,524 8,527 9,564 10,336 11,642 12,215 12,207 Imports 2,035 2,580 2,990 3,110 3,592 3,635 3,728 Exports 1,170 1,365 i,608 1,889 2,008 2,183 2,412 Import surplus 866 1,195 1,364 1,222 1,584 1,652 1,316 Gross national product 6,633 7,303 8,172 9,120 10,058 10,763 10,891 3 -.ice: Central bureau of Statistic Table 4 NET DOMESTIC PRODUCT AND NATIONAL INCOM AT FACTOR COST (At Current prices in millions of Israel pounds) 1958 1960 1962 1963 1964 1965 Branch Value % Value % Value % Value % Value % Value % Agriculture, forestry & 370.5 13.2 410.2 11.6 531.9 10.3 643.3 10.4 683.7 9.5 729.7 8.5 fishing Manufacturing, mining & 622.6 22.1 845.1 24.0 1275.5 24.8 1519.6 24.5 1805.6 24.8 2084.8 24.2 quarrying Construction & public 282.4 10.0 331.8 9.4 527.5 10.3 636.0 10.2 788.0 10.0 793.2 9.2 utilities (water & elec- tricity) Transportation & corunica- 216.4 7.7 280.8 8.0 416.4 8.1 502.1 8.1 608.2 8.4 757.9 8.8 tion Finance insurance & real 83.2 3.0 133.3 3.8 225.9 4.4 295.4 4.7 352.7 4.8 435.5 5.1 estate Ownership of dwellings 155.8 5.5 208.2 5.9 313.9 6.2 423.0 6.8 516.0 7.1 644.0 7.5 General government and private non-profit 534.5 19.0 658.6 18.7 911.0 17.7 1070.4 17.2 1255.7 17.3 1616.9 18.7 institution Trade and services 546.2 19.4 656.3 18.6 938.0 18.2 1121.8 18.1 1319.2 18.1 1558.6 18.o NET DDMESTIC PRODUCT AT 2811.6 100.0 3524.3 100.0 5140.1 100.0 6211.6 100.0 7269.1100.0 8620.6-100.0 FACTOR COST (BEFORE ADJUSTMENT) Less: Inventory adjustment (-)7.7 (-)12.5 (-)124.3 (-)28.0 (-)48.2 (-)61.6 Less: Depreciation adjustment (-)63.0 (-)68.0 (-)177.0 (-)213.8 (-)248.6 (-)294.8 NET DOMESTIC PRODUCT AT 270.9 3443.8 4838.8 5969.8 6972.3 8264.2 FACTOR COST (ADJUSTED) Less: Net factor payment (-)23.5 (-)26.3 (-)84.3 (-)39.3 (-)50.4 (-)54.9 to abroad .AkQtYAL fICOME 2737.4 3417,5 4754.5 5930.5 6921.9 8209.3 Source: Central Bureau of Statistics Table 5 GROSS INVESTIJENT AT CURRENT PRICES 7n rillions of Israel pounds) 1958 1959 1960 1961 1962 1963 1964 1965 Industry and mining 160 207 209 275 393 h72 522 499 Transportation and communications 76 94 89 132 212 278 451 473 Services 136 153 202 252 316 406 499 559 Agriculture 148 140 127 130 152 140 160 161 Irrigation 35 41 57 70 111 124 82 71 Electric power 51 37 37 41 77 6h 63 112 Ships and aircraft 34 27 66 102 66 50 175 89 Total productive investment 640 699 787 1002 1327 1534 1952 1964 Residential construction 300 337 347 472 670 682 790 853 Total fixed assets 940 1036 1134 1474 1997 2216 2742 2817 Investment in inventories 63 78 86 92 125 103 182 46 Total gross investment 1003 1114 1220 1566 2122 2319 2924 2863 Source: Bank of Israel Table 6 INVESTENT AND SAVING AT CURRENT PRICES (In millions of Israel pounds) 1958 1959 1960 1961 1962 1963 1964 1965 Net investment 722 798 854 1130 1504 1574 2071 1866 Depreciation 283 316 364 435 616 75 853 997 Gross investment 1005 1114 1218 1565 2120 2319 2924 2863 Private sector gross saving 526 668 767 869 1008 1217 1288 1400 Nonprofit institutions gross saving -45 -49 -50 -54 -64 -60 -48 -61 Total public sector gross saving -62 -48 -68 -5 -131 -4o 93 72 Gross saving 419 571 649 810 813 1117 1333 1411 Deficit on goodsand services 587 543 569 755 1307 1203 1590 1452 Total 1005 1114 1218 1565 2120 2319 2924 2863 Net private sector saving from 252 365 418 453 428 517 497 481 disposable income Net saving of public sector and -116 -110 -133 -78 -231 -145 -17 -67 nonprofit institutions Total net saving from domestic 136 255 285 375 197 372 480 414 sources Source: Bank of Israel Table 7 GNP, NATIONAL NICOIE AND PRIVATE DISPOSABLE INCOME AT CURRENT PRICES In millions of Israel pounds) 1958 1959 1960 1961 1962 1963 1964 1965 GNP 3542 4066 4574 5488 6607 7931 9186 10763 Less: Total indirect taxes 4l5 516 563 752 915 IoO 1218 1382 Depreciation 283 316 364 435 616 745 853 997 Errors and Omissions 127 148 229 276 321 215 193 175 National income 2717 3086 3418 h025 4755 5931 6922 8209 Plus: Net transfer payments, less 131 140 233 263 326 406 577 714 public sector income from property (60) (71) (92) (101) (129) (145) (164) (200) Private income from domestic sources 2788 3155 3559 4187 4954 6192 7315 8723 Less: Income tax, camp. saving and Absorption loan 243 269 316 380 547 741 916 1122 National insurance contributions 73 81 103 126 16 162 181 234 Total direct taxes 316 350 419 506 693 903 1097 1356 Private disposable income from domestic sources 2472 2805 3140 3681 4261 5289 6218 7367 Plus: Transfers from abroad 180 232 338 383 689 810 787 736 Total private disposable income 2652 3037 3478 4064 4950 6099 7005 8103 ,z-- n Bank of Israel Table 8 CONSUMER PRICE INDEX (Base: 1959=100) Weight Annual Average Economic Branches 1961 1962 1966 199 1960 1961 1962 1963 1964 1967 General Index 1,000.0 1,000.0 1,000.0 100.6 102.9 109.9 120.2 128.1 134.7 145.1 General Index excluding agricultural produce 807.6 831.4 895.2 99.9 102.6 109.6 120.5 129.2 136.7 147.0 Agricultural Produce 192.4 165.8 104.8 103.9 104.6 111.6 118.2 123.4 124.8 136.4 Industrial Production 476.2 482.5 491.5 99.2 100.6 106.6 114.1 116.2 119.7 132.2 Building and Housing Services 13b.5 127.5 158.4 100.9 105.2 113.0 134.0 159.3 194.7 216.1 Electricity and Water 20.0 20.7 20.4 99.0 100.6 102.7 107.2 113.5 113.5 119.4 Communications, Transport80cat 34.4 36.1 46.9 100.1 110.5 123.8 137.9 150.7 152.7 170.9 Cervices 113.9 139.3 152.5 101.8 105.5 113.6 129.8 140.2 149.9 163.7 Insurance and Taxes 28.6 28.1 25.5 100.7 103.2 114.2 123.6 127.4 129.8 131.9 3c;ro.e: Central Bureau of Statistics. Table 9 INDEX OF AVERAGE MONTHLY WAGES (January 1961=100) All Agriculture Industry Construc- Electricity Commerce Transport Public Personal tion Water Communication Services Services 1961 Average lo 114 104 104 107 106 109 10$ 101 2.962 Average 121 103 116 126 108 118 121 125 190 1963 Average 135 150 130 143 114 137 139 135 124 1964 Average 152 175 146 165 12$ 150 155 148 139 1964 March 151 183 148 162 119 152 152 145 135 June 150 174 145 166 121 146 151 148 137 September 154 170 148 162 121 160 171 149 149 December 162 164 158 190 138 155 159 157 148 (January 1965=100) 1.965 March 109 111 107 106 105 119 107 110 103 June 107 108 106 105 98 106 100 111 104 September 113 117 110 98 105 123 125 114 110 December 117 112 114 111 102 116 126 120 112 137 136 12' 121 131 161 151 145 131 132 135 127 122 132 1118 134 131 Table 10 OUTPUT OF SELECTED AGRICULTURAL PRODUCTS (In thousands of metric tons unless otherwise stated) Agricultural year 1952-53 1957-58 1959-60 1960-61 1961-62 1962-63 1963-64 1964-65 1965-662 theat 29.5 62.5 41.3 65.9 51.7 54.7 126.5 150.1 95.0 Coarse grains 91.0 119.4 52.1 105.9 101.3 84.3 203.4 138.3 70.0 Green fodder 642.4 1301.3 1596.2 1559.0 1616.4 1755.9 1713.6 1484.4 1400.0 Vegetables and potatoes 258.4 363.0 378.0 362.3 391.5 405.8 424.1 415.4 472,0 Citrus fruit 352.0 435.0 609.6 515.7 532.5 736.4 838.9 878.3 970.0 Other fruit $7.6 124.1 145.4 196.7 214.0 207.6 272.5 2b9.4 256.0 Mill/ 152.0 258.0 317.0 327.1 359.4 358.5 365.8 383,8 4o6.o Egg2/ 369.0 886.0 1114.0 1290.0 1273.0 1113.3 1278.5 1296.0 1233.0 Meat 12.1 52.7 81.4 88.3 100.6 110.0 117.0 116.7 120.5 Of which: Cattle (live ight) 2.8 10.2 25.1 22.7 22.5 31.1 35.5 30.9 28.2 Poultry 8.1 34.2 45.7 54.6 66.4 67.0 74.5 74.0 81.9 &zgar beet 8.2 9h.0 169.0 244.9 221.0 249.6 256.0 294.6 298.0 1/ Million liters. M illion units. Source: Central Bureau of Statistics. ominary Table 11 INDUSTRIAL PRODUCTION INDEX (at constant prices, Index 195b='00) Fourth Weights Industrial Production Quarter lajor Branch 1958 1963 1959 1960 1961 1962 1963 1964 1965 1965 1966 TOTAL 100.00 100.00 114 129 149 169 193 220 242 251 252 Mining and Quarrying 3.33 4.26 132 156 172 184 210 253 314 332 304 Manufacturing 96.67 95.74 113 128 148 168 192 218 239 248 250 Food (ncl. beverages & tobacco) 18.04 16.45 105 112 125 135 143 162 172 208 226 Textiles 13.67 11.44 109 128 160 188 214 246 271 260 301 Clothing 3.79 2.88 117 129 140 160 181 212 264 263 302 ;ood, wood products and furniture 5.60 6.23 119 121 144 182 219 260 299 317 294 Paper and paper products 2.01 2.59 105 131 153 169 201 236 250 236 265 Prirt-ng and pubLishing 3.49 4.13 118 134 150 158 180 202 220 216 236 Leather and leather products 2.36 1.65 110 118 131 155 164 170 190 187 172 Rubbcr and plastic procucts 4.53 4.00 121 133 160 186 225 271 301 299 321 Chemical and Petroleum products 7.42 8.26 112 131 153 171 193 222 261 269 274 Non-metallic mineral products 9.42 7.99 116 123 137 159 182 197 207 211 189 Diamond industry 2.61 3.07 133 165 192 244 304 313 335 302 365 Basic metal industries 2.50 2.95 125 146 175 202 227 242 261 252 237 4etat products 8.27 6.51 113 124 133 161 186 209 219 219 214 .Iachinery 3.28 4.30 122 133 158 173 209 233 247 269 222 Slectrical machinery and equipment 3.68 3.66 117 143 175 199 240 271 312 302 2865 £ransport equipment 4.10 8.07 112 130 152 170 187 220 229 235 192 liscellaneous manufacturing 1.90 1.56 118 176 193 173 184 226 242 255 195 ;ource: Central Bureau of Statistics Table 12 MONEY SUPPLY (In millions of Israel pounds: end of period) Demand Money Cash deposits suEply 1960 June 288 544 832 December 3no 580 880 1961 June 345 656 1,001 December 344 625 969 1962 June 377 763 1,140 December 409 847 1,257 1963 June 501 1,011 1,512 December 525 1,084 1,609 1964 March 584 1,089 1,673 June 583 1,109 1,692 September 607 1.100 1,706 December 590 1,117 1,707 1965 March 623 1,102 1,726 June 640 1,217 1,857 September 680 1,256 1,936 December 657 1,242 1,899 1966 March 702 1,185 1,887 June 713 1,296 2,009 September 742 1,270 2,012 Source: Bank of Israel Table 13 CREDIT BY THE BANKING SYSTEM, BY SECTORS (in millions of Israel pounds) September 1960 1961 1962 1963 1964 1965 1965 1966 Agriculture 143 157 177 170 197 223 205 228 Manufacturing Industry 214 264 393 518 636 674 655 805 Construction 43 52 63 75 84 94 104 115 Trade 77 82 114 118 122 132 128 14 Other Services 1/ 167 196 238 268 230 380 367 464 Public Sector and Credit and financial institu- 54 89 124 114 144 240 195 288 tions I/ Including Public services,business services and miscellaneous Source: Bank of Israel Table 14 INCREASE ITIFINANCIAL ASSKSOFTIE PUBLIC BY SOURCE AND COMPONENT 1960-196' (In millions of Israel pounds) Jan.-Sept. 1960 1962- 1963 1964 1965 1965 1966 Sources Increase in foreign exchange assets 153 733 227 42 219 184 -106 Bank credit to the public 94 169 155 148 136 99 200 Government debt 2 -36 -60 95 55 53 180 Others -4 -294 119 -32 -17 6 -6 Components Cash 4o 65 116 65 67 90 85 Demand deposits 115 222 237 33 124 139 28 Other deposits 91 284 89 156 202 113 155 1/ Including devaluation and linkage increments Source: Bank of Israel Table 15 INTERNAL GOVEMENT DEBT, 1260-1966 Amount OutstandinM at end of March tTn millions of Israel poundsT 1960 1961 19621/ 1963 1964 1965 1966 A. By type Bonds; "Short-term loan" -- 19 38 122 259 270 194 Others 210 225 326 320 314 406 396 Treasury notes and bills 151 151 151 151 151 149 147 Other long-term loans from 4/ Bank of Israel 171 202 92 92 242- 108 236 Bonds floated by financial institutions 39 38 170 228 234 280 358 1952 forced loan2/ 33 31 29 27 22 15 13 Deposits of financial institutions -- -- -- 13 22 23 22 Sub-total 604 666 8o6 953 1244 1251 1366 Loans from National Insurance Institute 175 225 290 373 456 543 673 Total 779 891 1096 1326 1700 1794 2039 B. Ly holders Private individuals (rcugh estimate) 145 147 197 261 363 372 277 Institutional investors (rough estimate) 86 105 313 386 424 531 605 Commercial Banks 51 61 53 63 64 91 101 Bank of Israel 322 353 243 243 393A/ 257 383 Total3/ 604 666 8o6 953 1244 1251 1366 C. Debt of Local Bodies 157 191 225 267 316 385 n.a. 1/ Includes revaluation of dollar-linked debt; index-linked debt was not revalued. 2/ Includes income tax advance levied in 1953/54. 3/ Excluding National Insurance Institute (see above). F/ Increase of about IL150 million in 1963 on account of Bank of Israel loan forprepayment of foreign debt. Source: Bank of Israel Table 16 SUMMARY OF GOVERNMENT BUDGET (in millions of Israel pounds) 1962/63 1963/64 1964/65 1965/66 1966/671/ 1967/681/ Ordinary revenue 1618 2015 2451 2888 3544 3756 Ordinary expenditure 1397 1706 2302 2620 3239 35o Balance on the ordinary budget 221 309 1-7 2 30 252 Capital revenue 126 164 118 119 149 156 Capital expenditure 637 876 799 1052 885 1233 Balance on capital budget -71l .712 -38- -933 -776 -1077 Balance before Financial transactions -290 -403 -532 -665 -431 -825 Grants 127 124 103 100 - - Loans: foreign & domestic 610 714 729 928 910 1218 Debt repayments -252 -296 -318 -392 -499 -393 Net borrowing 358 418 411 536 481 825 Total receipts 2481 3017 3401 4035 4603 5130 Total outlays 2286 2378 3419 h06l 653 5130 Overall surplus or deficit (-) 195 139 -18 -29 50 - 1/ Budget proposal. Source: Bank of Israel Table 17 ORDINARY GOVERN,TENT REVENUE (in millions of Israel Pounds) 1962/63 1963/64 196h/65 1965/66 1966/671/ 1967/681' Income tax h99 689 876 1056 1366 1478 Compulsory savings 71 97 111 147 172 189 Property tax 60 76 97 164 190 190 Customs duties 248 274 349 424 469 479 Fuel tax 79 93 114 125 187 202 Purchase tax 211 268 319 386 423 443 Excise taxes 112 124 135 149 180 173 Interest on government loans 82 117 130 163 178 199 Other 256 277 320 274 379 403 Total 1618 2015 2451 2888 3544 3756 1/ Budget proposal. Source: Bank of Israel Table 18 ORDINARY GOVERNENT EXPENDITURE (in millions of Israel pounds) 1962/63 1963/64 1964/65 1965/66 1966/67 1967/68- Ministry of Defense 410 545 751 850 984 984 Ministry of Health 82 91 107 146 151 165 Ministry of Foreign Affairs 36 44 57 66 61 65 Ministry of Education 170 199 254 390 456 467 Ministry of Police 48 55 68 77 92 104 Ministry of Social Welfare 33 38 40 54 57 61 Ministry of Labor 54 59 59 74 79 105 National Insurance Institute 17 17 20 35 37 62 Subsidies for price stabilization 118 144 200 189 170 175 Promotion of new markets 25 6 12 27 33 136 Special budgets 19 25 164 8 220 16o Special reserve - - - 4 140 90 Interest payments 191 249 271 301 344 380 Other 194 234 299 399 415 550 Total 1397 1706 2302 2620 3239 3504 i/ Dudget proposal. Source: Bank of Israel Table 19 GRANTS AND LOANS RECEIVED BY THE GOVERNMENT (In millions of Israel pounds) 1962/63 1963/64 1964/65 1965/66 1966/67 1/ 1967/68 1/ German reparations 113 124 103 100 - - U. S. development loans and 169 163 170 180 193 191 P.L. 80 Other foreign loans 240 309 364 400 o30 605 Foreign grants and loans 522 596 637 680 623 796 National Insurance Institute 83 84 87 129 127 117 Domestic bond issues 132 158 86 215 16o 305 Bank loans - - 30 4 - Domestic loans 215 242 203 348 287 422 Total 737 838 840 1028 910 1218 1/ Budget proposal. Source: Bank of Israel lable 20 CAPITAL EXPENDITURE OF THE GOVERNMENT (in millions of Israel pounds) 1962/63 1963/64 1964/65 1965/66 1966/671/ 1967/681/ Development Budget Agriculture 69 81 66 88 101 158 National lhter Carrier 74 99 54 45 21 28 Industry and crafts 75 76 22 26 35 85 Mining and quarrying 20 30 27 18 33 38 Electric pouer 11 36 26 53 5 23 Transport 95 114 130 152 69 51 Postal services 39 43 78 106 104 125 Housing 74 117 255 244 198 285 Loans to local authorities 11 10 14 15 15 15 Public & government buildings 18 20 44 52 50 73 Tourism 9 10 8 15 16 20 Oil pipelines and wells 7 11 11 18 l4 19 Roads 5 20 29 42 34 37 Miscellaneous - 10 15 10 12 13 Special Reserve for employment - - - - - 50 Reserve - - - - 37 37 Total 504 677 779 884 744 1057 Special budgets 104 124 - 158 120 155 Working capital for stock 16 75 20 10 15 15 Other 13 - - - 6 6 Total 637 876 799 1052 885 1233 1/ Budget proposal. Scurce: Bank of Israel Table 21 PROJECTED GOVERNMENT CAPITAL EXP1NDITURES (in milliona offIsrael pounds5 1967/68 1968/69 1969/70 1970/71 1971/72 Development Budget Agriculture 123 127 107 107 108 Water projects 63 65 65 65 65 Industry and crafts 85 63 65 68 62 Mining and quarrying 38 50 U5 35 30 Electric power 23 41 24 26 25 Transport 51 58 58 4b 48 Postal services 125 125 125 125 125 Housing 285 300 300 300 300 Loans to Local authorities 15 15 15 15 15 Public and government buildings 73 88 89 90 91 Tourism 20 15 15 15 15 Oil pipelines and wells 19 20 20 20 20 Roads 37 45 45 55 55 Television and radio -- 15 15 7 8 Miscellaneous and reserves 100 72 62 77 83 Total 1,057 1,100 1,00 1,050 1,050 1/ Provisional estimates Source: Ministry of Finance: Office of the Budget. Table 22 BALANCE OF PAYMNTS (in milions of U.S. dollare) 1958 1959 1960 1961 1962 1963 1964 19651 Goods and Services Exports, f.o.b. 138.0 174.5 210.3 238.5 271.4 337.1 349.4 403.4 Imports, f.o.b. -373.4 -381.2 -442.5 -521.2 -559.9 -597.7 -741.6 -733.0 Trade Deficit -235.4 -206.7 -232.2 -282.7 -288.5 -260.$i -392.2 -329.6 Met Invisibles (except investment income) -72.6 -73.2 -61.0 -11o.6 -135.7 -119.6 -112.0 -122.8 Investment Income -28.4 -35.7 -43.5 -56.1 -55.3 -54.5 -65.1 -68.7 Total Invisibles -101.0 -108.9 -104.5 -166.7 -191.0 -174.1 -177.1 -191.5 A. Deficit on Doods and Services -336.4 -315.6 -336.7 -?49.4 -479.5 -434.7 -569.3 -521.1 Unilateral Transfers Private donations 2 111.8 10%.1 123.5 131.1 151.5 172.5 191.8 206.3 Restitutions ) 110.5 133.9 138.9 134.2 112.7 Reparations ) 136.1 137.0 173.5 88.3 47.0 28.5 16.9 16.7 U.S. and U.N. Technical Assistance 16.7 9.8 14.1 10.5 8.0 6.o 8.4 4.9 B. Total Unilateral Transfers 263.6 250.9 311.1 340.4 340.4 315.9 351.2 340.6 Residual Deficit (A-B) -72.8 -64.7 -25.6 -109.0 -139.1 -88.8 -218.0 -180.5 C. Capital (net) rivate foreign investment 13.8 25.4 53.4 51.4 82.8 136.1 145.9 98.0 Independence and Development Bords 33.8 35.3 28.3 32.1 33.4 23.2 24.5 33.3 Other medium and ) ) long-term capital) ) 63.3 47.2 18.2 100.5 119.3 32.2 104.7 116.2 Short-term and ) errors and owdmions) 19.9 44.2 6.4 -35.8 39.0 Total Capital 110.9 107.9 99.9 203.9 279.7 197.9 239.3 286.5 Change in Foreign Exchange Reserves 3/ -38.1 -43.2 -74.3 -94.9 -140.6 -109.1 -21.3 -106.0 (- increale) 1/ Provisional. 2/ Includes immigrants transfers in cash and kind. 3/ Includes net foreign exchange position of Israeli commercial banks. Source: Bank of Israel Table 23 RECEMITS AND PAYMENTS ON INVISIBLE ACCOUNTS1/ (in millions of U..S. dollarc) 1958 1959 1960 1961 1962 1963 1964 1965 Tourism: Export 12 16 27 30 38 53 55 56 Import 3 7 11 18 26 38 37 44 Net 9 9 16 12 12 15 18 12 Transpor- Export 53 60 71 90 116 115 126 150 tation: Import 32 39 44 54 69 71 83 91 Net 21 21 27 36 47 44 3 59 Insurance: Export 16 18 22 28 27 31 41 46 Import 20 21 22 29 28 31 43 45 Net -4 -3 0 -1 -1 0 -2 1 Interest: Export 5 6 8 13 21 26 29 37 Import 34 41 51 65 76 81 94 loS Net -29 -35 -43 -52 -55 -55 -65 -68 Other: Export 10 11 22 25 29 45 53 58 Import 62 69 76 117 169 173 167 188 Net -52 -58 -54 -92 -140 -128 -114 -130 Total -55 -66 -54 -97 -137 -124 -120 -126 1/ Imports of services have been calculated according to the C.I.F. value of commodity import. Source: Data from Bank of Israel. Table 24 TRANSFER PAMNTS, 1960-65 (In millions of U.S. dollars) 1960 1961 1962 1963 1964 1965 Private receipts, net Personal restitutions from the Federal Republic of 97,8 110.5 133.9 138.9 134.2 112.7 Germany, in cash Personal and institutional remittances in cash 109.6 117.1 139.3 164.2 182.4 197.9 Transfers in kind 13.9 14.0 12.2 8.3 9.4 8.4 Total 221.3 241.6 285,4 311.4 326.0 319.0 Central Government receipts, net Reparations from the Federal Republic of Germany 75.7 88.3 47.0 28.5 16.9 16.7 U.S. economic and technical assistance 14.1 10.5 8.0 6.0 8.4 4.9 Total 89.8 98.8 55.0 34.5 25.3 21.6 Grand Total 311.1 340.4 340.4 345.9 351.3 340.6 Source: Bank of Israel Table 25 COMODITY COMPOSITION OF EXPORTS (In millions of U.S. dollars) Jan.-Sept. 1960 1961 1962 1963 1964 1965 1965-1966 Agricultural exports Citrus fruit 46.6 40.5 49.2 74.7 52.8 70.9 61.4 66.5 Eggs 10.7 12.2 8.6 5.2 6.0 4.7 3.8 2.7 Other 5.9 9.9 10.6 9.1 7.9 10.5 7.2 10.4 Total Agricultural 63.2 62.6 68.4 89.0 66.7 86.1 72.4 79.6 Industrial exports Diamonds (polished) 60.9 70.3 89.3 116.0 137.7 153.7 111.5 137.5 Textiles and clothing 18.2 24.5 30.2 31.2 39.4 40.1 29.1 33.3 Tires and tubes 7.8 8.4 9.9 8.8 8.4 8.8 6.6 7.2 Chemicals 10.4 12.4 11.6 13.5 17.3 24.7 18.9 17.3 Mining products 7.0 6.3 6.4 7.4 12.5 14.0 11.3 14.2 Processed food 14.8 16.2 17.2 24.2 30.6 32.7 26.8 27.4 Other 34.3 44.6 46.2 61.4 59.8 69.0 52.0 61.9 Total Industrial 153. 182.7 210.8 262.5 3057 343.0 256.2 298.8 Total gross exports 216.6 245.3 279.2 351.5 372.4 429.1 328.6 378.4 Less goods returned and adjustments 5.3 6.2 7.8 13.2 20.6 23.4 18.6 19.6 Total net exports 211.3 239.1 271.h 338.3 351.8 405.7 310.0 358.8 Source: Bank of Israel Table 26 COIMODITY COMPOSITION OF IMPORTS (In millions of U. S. dollars) 1960 1961 1962 1963 1964 1965 Jan-Sep. 1965 1966 Wheat and meslin (inch. spelt) unmilled 22.2 2h.1 22.3 21.0 13.6 14.o 7.0 16.7 Other cereals 25.0 24.0 23.9 29.1 25.0 29.0 21.1 35.5 Sugar 5.7 3.6 4.1 11.8 19.4 7.9 3.8 3.8 Meat 2.5 2.0 6.1 7.0 13.1 18.4 12.9 24.6 Oil seeds and nuts 20.6 20.9 24.6 22.6 28.8 29.1 21.8 21.9 cottpn 3.3 4.1 4.t 4.8 9.8 8.4 6.8 5.1 Wool 4.5 6.2 7.6 7.0 6..7 6.3 5.3 4.8 Petroleum and products 34.2 33.6 39.6 38.8 46.6 53.64 37.5* 44.0* Chemicals 24.3 28.6 35.6 36.1 42.0 h.5 37.2 39.5 Plastics and products 4.7 5.1 7.0 7.4 8.7 8.8 6.4 7.3 Textile Yarns 7.6 8.7 10.3 10. 13.8 15.0 11.7 11.3 Precious stones 49.8 58.0 7b.3 100.2 117.3 110.8 75.6 98.8 Iron and steel 39.9 42.7 45.3 [3.3 54.3 55.1 4o.2 33.6 Machinery 77.5 93.4 118.8 115.7 132.8 136.9 110.5 108.7 Road motor vehicles 25.8 25.9 31.8 38.6 [9.9 46.2 34.3 26.0 Ships and boats 36.7 [9.8 6.3 16.7 58.3 32.0 31.6 10.7 Aircraft 2.6 18.8 23.2 4.8 8.9 4.4 3.4 11.0 Other 115.8 1L2.5 149.3 158.3 185.3 216.1 153.3 136.4 Total Cross imports 502.7 592.0 634.5 673.6 839.3 837.5 623.h 639.7 Less goods returned 7.0 8.1 8.3 10.1 22.0 21.3 17.0 16.4 4 tal net imports [95.7 583.9 6?6.? 663.5 817.3 616.2 6o6.. 623.3 Table 27 DIRECTION OF TRATE (in millions of U.S. dollars) 9 months 1960 1961 1962 1963 1964 1965 1965 1966 Exp. Im.p Exp. IMp. Exp. I FExp. Imp. Exp, Imp. ExT. IM. Exp. Imp. E European Economic community 64.5 -b5.9 69.4 180.7 72.8 149.9 106.6 156,8 104.2 2h2.3 121.9 201.6 96.2 148.5 J12.0 152.6 Belgium 13.6 11.4 150.0 11.2 13.6 12.1 20.0 12.7 22.3 37.7 23.2 27.1 17.7 19.1 24.4 22.7 France h.6 25.4 4.7 46.8 7.1 31.5 15.2 32.6 11.8 68.8 16.0 35.4 12.0 27.4 13.1 25.8 Germany (Fed. Rep.) 21.0 71.9 24.8 84.8 28.9 63.1 39.5 61.4 33.3 65.7 40.1 74.9 33.7 55.7 39.4 52.3 Italy 10.6 13.7 12.1 13.9 9.3 15.3 7.8 18.2 6.6 34.5 6.0 32.0 4.4 23.7 6.2 23.4 Netherlands 1.7 23.5 12.8 23.8 13.9 27.7 24.1 31.6 30.2 35.1 36.6 31.9 28.3 22.3 28.9 28.2' United Kingdom 36.1 59.3 35.8 80.1 37.9 101.2 47.8 131.o 46.o 159.0 5o.8 164.2 hla3 122.0 48.4 112.0 United States 29.4 186.5 39.2 172.9 42.3 212.3 46.4 185.2 54.7 208.6 62.2 212.2 45.6 157.8 58.7 173.3 Yugoslavia 5.0 5.1 5.7 6.0 8.8 6.3 6.3 7.1 8.8 8.7 8.9 6.3 6.6 5.0 8.3 5.8 Turkey 8.9 7.7 7.3 6.0 8.7 4.1 8.9 3.7 5.1 6.6 7.3 8.2 4.9 5.8 5.9 4.2 Hong Kong 7.5 0.0 7.9 0.1 8.8 0.3 12.7 0.1 12.7 0.2 16.7 0.4 11.4 0.3 14.8 0.5 Finland 3.1 8.8 3.4 10.5 4.3 12.8 4.6 9.6 4.3 9.6 4.6 9.2 3.7 6.9 4.1 5.5 Canada 2.6 6.7 3.3 9.2 5.6 5.6 5.4 8.9 5.7 10.2 6.6 5.? 5.4 4.1 5.3 4.3 South Africa 1.9 6.3 2.6 7.1 2.0 5.5 2.5 4.7 2.1 4.8 2.7 4.3 2.1 3.3 1.6 3.2 Other Countries and 57.6 76.4 70.7 117.4 88.0 136.5 109.0 163.5 128.8 189.3 147.h 225.4 111.4 169.7 119.3 178.3 Unclassified Total 216.6 502.7 2h5.3 592.8 279.2 634.3 351.5 673.6 372.4 839.3 429.1 837.5 328.6 623.4 378.4 639.7 30% 29% 28% 31% 26% 24% 30% 23% 28% 29% 28% 24% 29% 24% 30% 24% Source: Statistical Bulletin of Israel, Part C, Foreign Trade. Table 28 EXPORT PROJECTION (in millions of U.S. dollars) 1960 1965 1966 1971 Agricultural Exports Citrus fruit 46.6 70.9 74.4 85.0 Other 16.6 15.2 20.8 55.0 Total Agricultural 63.2 86.1 95.2 lhO.O Industrial Exorts Diamonds (gross) 60.9 153.7 190.0 300.0 Chemicals 10.4 24.7 n.a. 95.0 Mine products 7.0 14.0 n.a. 30.0 Textiles and clothing 18.2 40.1 n.a. 70.0 Processed foods 14.8 32.7 n.a. 50.0 Other h2.1 77.8 n.a. 255.0 Total industrial 153.4 343.0 h05.9 800.0 Total gross exports 216.6 h29.1 501.1 940.0 Less goods returned and adjustments 5.3 23.4 26.1 50.0 Total net commodity exports 211.3 L0.7 475.0 890.0 Rate of growth: 1960-1965 1.0% p.a. 1965-1966 17.3% 1966-1971 13.3% p.a. Source: Bank of Israel and data supplied to the mission. Table 29 IMPORT COIMPONENT FINAL DEMAND (in millions of Israel pounds at 1963 prices) 1958 1959 1960 1961 1962 1963 1964 Private Consumption 3224 3533 3833 4216 4701 5807 5780 Import Component % 20.6 20.8 21.3 22.0 21.3 20.8 21 1 Public Consumption 108$ 1142 1267 1492 1652 1802 1940 Import Component % 23.3 24.0 22.4 29.1 32.3 29.2 28.1 Gross Investment 1470 1607 1659 1958 2222 2287 2763 Import Component % 34.2 29.4 34.6 34.8 32.3 31.7 33.0 Exports 668 877 1111 1305 1551 1812 1902 Import Component % 39.1 397 36.4 42.8 45.8 42.1 h-3 Total Final Demand 6447 7159 7870 8971 10186 11108 12385 Import Component 26.1 25.5 26.4 29.0 29.3 27.9 28.4 Source: Bank of Israel