The Israeli economy is facing major difficulties caused largely by shocks that were either external or non-economic in origin. The ongoing regional security problem is gradually spreading to the whole of the economy through weaker investor and consumer sentiment, stated the International Monetary Authority (IMF) in its recently completed Article IV Consultation with Israel.
IMF Directors emphasized that the restoration of peace, given Israel's strong fundamentals, would yield substantial economic gains to the region as a whole. Directors considered that, under the current economic conditions, it is crucial for the authorities to pursue credible, transparent, and consistent policies that would maintain market confidence and stability. The cost of policy slippages could be high at this juncture.
Directors stressed that the government should take a number of additional structural steps to enhance the credibility of the fiscal adjustment process, thus cushioning market reaction to temporary shocks. These should include, in particular, a medium-term fiscal program in which future spending plans and commitments, as well as the expiration of any one-off deficit cutting measures, are clearly identified in a transparent way.
Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies.
On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. This PIN summarizes the views of the Executive Board as expressed during the March 7, 2003 Executive Board discussion based on the staff report. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
