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(photo credit:Ariel Jerozolimski)
The Finance Ministry on Sunday announced an expansion of government export guarantees in an attempt to boost exporters struggling with the strong shekel.
The government will guarantee $530 million of medium-to long-term export deals through Israel Credit Insurance Company (ICIC) and another $300m. through private companies.
Previously, only short-term exports were covered in the private market.
“This agreement is a part of a series of initiatives the Finance Ministry is taking that are intended to aid exporters in expanding their activity to deal with international competition and the weak dollar and to continue leading Israeli industry forward,” Finance Minister Yair Lapid said.
Providing government guarantees helps reduce credit risk and thus lowers the cost of exports. As Israeli exports to emerging markets increase, the need for insurance is all the more necessary for exporters.
Ashra acting CEO Dudi Klein said the steps would help the struggling exporters by making them more competitive.
“Recently, the demand for long-term financing in the framework of international projects has become more widespread and has become a condition for winning contracts,” he said.
The shekel has appreciated 4.4 percent in the 12 months until May, according to the Bank of Israel, and exports of goods have felt the effect.
“Foreign trade data for April continue to indicate marked weakness in goods exports, which declined by 11 percent in April compared with March (monthly, seasonally adjusted data, excluding ships, aircraft and diamonds), and the trend of decline in its volume is strengthening,” the Bank of Israel Monetary Committee wrote in its discussion on the June interest rate.
Ramzi Gabai, chairman of the Israel Export and International Cooperation Institute, praised the new policy. The assistance does not cover project financing, which is necessary for some export projects, he said.
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