Fischer: 'Reforms must go on'

Bank of Israel Gov. says it is vital that next government be committed to same strategy.

By DANIEL KENNEMER
stanley fischer 298.88 (photo credit: Ariel Jerozolimski)
stanley fischer 298.88
(photo credit: Ariel Jerozolimski)
It is vital that the next government be committed to the same macroeconomic strategy and continued structural reforms that created the conditions for healthy and sustained growth in the country, Bank of Israel Governor Stanley Fischer said Thursday. "Domestic and foreign investors must be sure, even now, that this strategy is not at issue, and that everyone is committed to it," Fischer told the annual meeting of the Association of Banks in Tel Aviv. In addition to the positive growth trend globally, Israel's current economic growth cycle also has been the result of government macroeconomic policy over the past few years, including reforms, privatizations, and infrastructural investments - particularly the railway system, Fischer said. He mentioned reforms of the ports and labor and capital markets, privatizations of the country's banks - completed recently with the sale of Bank Leumi - and formerly state-owned companies, such as Bezeq and El-Al. "Another aspect of the same strategy is the monetary policy pursued by the Bank of Israel, which focuses mainly on maintaining low inflation in line with the government's target," he said. "The Bank of Israel will continue to pursue an interest-rate policy consistent with the inflation target of between 1 percent and 3% a year, with the intention of reaching the mid-point of the target." Fischer pointed out that this strategy creates the conditions needed for long-term growth without which the problems facing the economy, in particular the problem of poverty, cannot be tackled. He also stressed that as long as there was no increase in the number of large banks - whether through the merger of small and medium banks or through the entry of foreign banks - the Bank of Israel would have to continue examining ways of strengthening competition in the sector. "The banking system is very important in every economy, and of course Israel is no exception. The importance, however, clearly lies in the banking system being healthy, stable and competitive," he said. Noting that, in accordance with the Bachar reform, banks have successfully begun selling off their provident and mutual funds, Fischer said he was "happy that the pessimistic scenarios predicted by some are not being realized." "It is natural that concern is felt before reforms and changes, but it must be understood that Israel's financial system is in need of additional reforms," he said.