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(photo credit: Ariel Jerozolimski)
Finance Minister Yair Lapid and Economy Minister Naftali Bennett on Tuesday announced steps to help Israeli exporters, who have faced difficulties given the ever-strengthening value of the shekel.
The state is increasing its foreign trade guarantees from NIS 7.5 billion to NIS 13.3b. over three years, bringing them in line with the OECD average. It is to give immediate business insurance approval for deals done through ASHRA (the Israel foreign trade risk insurance corporation) and give government backing to medium- term foreign exchange insurance.
Furthermore, a NIS 50 million “smart money” program will seek to help 100 exporters sell their products in targeted markets.
“The slowdown in exports in recent months is worrying, and we are determined to stem it,” said Lapid. “The program is intended, among other things, to remove barriers in order to strengthen exporters, increase Israeli exports and extend them to new markets. Exports are the growth engine of the Israeli economy, and we must work hard to ensure that this engine continues to run.”
Bennett added, “The government is reducing the risk exporters assume when they engage in business overseas.
We’re talking about an important step that will help small and large businesses alike. It’s very hard to set the right exchange rate, but we know that we can and should help exporters reduce uncertainty and enable them to more easily reach foreign markets with less risk.”
The Israel Manufacturer’s Association, however, was lukewarm in response to the announcement, arguing that only drastic intervention in the foreign currency market could help exporters.
“There should be action to stop the trend of contracting exports, so every step from the government is welcome,” said IMA president Zvi Oren.
“However, in order to allow the tools to develop and help, it should be seen to that, even artificially, the dollar rate be held at NIS 3.8. We are aware of the Bank of Israel’s actions on the issue, and it should be increased.”
The shekel, which closed near 3.5 to the dollar on Tuesday, was last valued at 3.8 in December, 2012. A report last week by Merrill Lynch/Bank of America estimated that the Bank of Israel would have to purchase $1b. a month in foreign reserves just to keep the currency at its current levels.
Despite the shekel’s strength, Israel’s exported goods and services rose by 21.5% in the last quarter of 2013.
“From the export perspective, as long as there is not a sharp appreciation in the shekel, we expect the recovery of exports to continue at the pace of world trade growth,” said Harel Finance’s head of the economic and research department, Ofer Klein.
The IMA also blasted the government over high municipal taxes, water and electricity rates, and cumbersome bureaucracy.Globes contributed to this report.