Britain And Israel To Negotiate On Financial Differences

Gisborne Herald, Volume LXXVI, Issue 22887, 5 March 1949, Page 7

Britain And Israel To Negotiate On Financial Differences

(From a Reuter Correspondent) LONDON When an Israeli delegation comes to London probably next month to negotiate financial arrangements with Britain, each side will have a major claim to make. Israel will want satisfaction about Britain’s action a year ago, in expelling her from the sterling area and freezing her bank balance. Britain did this on the ground that, with the approaching disturbances, the authorities in Palestine could not ensure the exchange control obligatory on all members of the sterling area. Britain will want satisfaction over the sterling cross rate against the dollar. Prominence has been given in the British Press to the assertion that the Israeli Authorities maintain their pound at three dollars, while sterling stands at par, so that sterling in Israel is at a discount of 25 per cent against the dollar.

Britain and the Bretton Woods Monetary Fund are inflexibly opposed to this. _ Thev stopped France and Italy quoting sterling at such discounts. Wherever sterling is at a discount against the dollar, local traders who can get sterling area goods can re-export them to the dollar area making large exchange profits for themselves, and depriving Britain of all the dollars concerned.

According to Israeli banking quarters, this alleged discount, and even the quotation of the Israeli pound in New York, rest on a misunderstanding of the real position. They aver that both dollar and sterling are at parity in Israel but that when the Jewish National Fund sells dollars to Israeli importers of dollar goods, it charges them a commission of 25 per cent. This makes the effective import rate three dollars but they regard this as a levy by the Jewish National Fund on Israeli buyers of imported dollar goods, and not as an exchange rate depreciation.

The International Monetary Fund could hardly admit the argument that the difference is a commission and, not an exchange depreciation. It would be ■worried not only by Israeli’s case, but even more by the precedent for other countries. The Bretton Woods fund has no jurisdiction over non-members Until Israel is admitted to the United Nations there can be no question of its joining any of the United Nations specialised agencies, of which the Bretton Wods fund is one. Israel might anyhow prefer not to seek membership of the fund.