To the Congress of the United States:
The attached report to the Congress on the Loan Guarantees to Israel Program was completed on December 31, 1997. Since then there have been several key, positive economic developments in Israel that I wanted to communicate to the Congress.
The Israeli Knesset passed its 1998 budget on January 5. The final budget adhered to the deficit target of 2.4 percent of gross domestic product (GDP) set by the Israeli Cabinet in August 1997, and established a spending target of 46.3 percent of GDP (down from 47.3 percent in 1997), without resorting to additional taxes. Furthermore, due partially to the mid-year spending cuts discussed in the report, the Government of Israel over-performed the 1997 deficit target of 2.8 percent of GDP by a significant margin; the 1997 budget deficit came in at 2.4 percent of GDP. These events demonstrate the commitment of the Israeli government to fiscal consolidation and reform.
Second, the Israeli consumer price index (CPI) for 1997 rose by only 7 percent, at the bottom of the 7-10 percent 1997 target range and a 28-year low. This indicates that the battle being waged by the Bank of Israel and the Israeli government against persistent inflation is succeeding. The Israeli Ministry of Finance is reportedly considering lowering the 1998 inflation target (currently set at 7-10 percent) in order to consolidate the strong inflation performance registered in 1997.
This information will be included in the 1998 report to the Congress on the Loan Guarantees to Israel Program.
William J. Clinton
Sources: Public Papers of the President