Bank of Israel Governor Stanley Fischer told the International Monetary Fund and World Bank Semiannual Meeting in Istanbul that Israel had to raise interest rates before other countries. He said that Israel was not attempting to show other countries the direction of international policies but rather in Israel, unlike in other countries, inflation was beginning to rise.
Fischer also said that Israel had not had to make major budget cuts as in other countries because there had not been the same fiscal expansion elsewhere. This also meant, he added, that Israel did not have to deliberate about future fiscal policy as was happening in other countries.
Fischer explained why Israel did not have to make tough decisions about the budget. He said, "In August 2008 the previous government resigned and so there was nobody to approve a new budget. This meant expenditure was restricted to one twelfth of the approved budget monthly. This prevented expenditure from being increased. The deficit that was created was a result the fall in tax revenue, which was accompanies by a fall in growth."
He continued, "When the budget was eventually approved in July 2009, there was already no need to include a package for special assistance, and it was enough to get by with the plans launched for financial assistance to the business sector."
Published by Globes [online], Israel business news - www.globes-online.com - on October 4, 2009
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