Banks, Economists Blast Peres for Devaluing Shekel

Labor party leader Shimon Peres was under attack Wednesday for devaluing Israel’s shekel just five days after taking up his new job as finance minister.

Peres devalued the shekel by about 5% against the dollar Tuesday. The Bank of Israel said the move was needed to check speculative purchases of foreign currency.

But bankers and economists said there should have been other measures including wage restraints and budget cuts along with a devaluation. Newspapers said Peres did not consult Finance Ministry officials.

“The devaluation of the shekel has turned an economic problem into a crisis. With one nervous blow, the economy has been thrown back into the chaotic days of uncertainty and speculation,” said Jerusalem Post economics editor Shlomo Maoz.

“By disregarding the advice of professionals at the Treasury and preferring to pay attention to those with vested interests, Shimon Peres has committed a serious blunder,” Maoz said.

A rush for foreign currency has been driven by speculation that the shekel would be devalued by as much as 15% next month when Peres brings in an economic recovery package.

Banks said buying of foreign currency continued on Wednesday with purchases by midday of $80 million to $100 million.

Bank of Israel Governor Michael Bruno had pressed Peres to make Tuesday’s devaluation, which set a representative rate of the shekel at 1.68 to the dollar, as speculative buying of foreign currency threatened to deplete Israeli reserves.

Israel is suffering from its most serious economic slowdown in three years, with industrial output down 3%, partly because of the Palestinian uprising.