Sources inform ''Globes'' that the Israel Export and International Cooperation Institute is calling on the Bank of Israel to continue its dollar purchasing program and to boost Israel's foreign currency reserves to $60 billion. These reserves currently total $33.65 billion.
The sources added that Export Institute chairman David Arzi will give Governor of the Bank of Israel Prof. Stanley Fischer a report by Financial Immunities Ltd., which states that the Bank of Israel's own models suggest that the optimal level of foreign currency reserves is $60 billion, given the size of the economy, and not $40 billion, which was appropriate for 2005-06.
"Globes" has obtained a copy of the Financial Immunities report. It is a comparative study of countries with economic features similar to Israel's: autonomous currencies, open markets, and a high ratio of foreign trade. The report examined 15 countries' foreign reserves, foreign reserve/GDP ratio and foreign reserve/foreign trade ratio: Australia, Brazil, Czech Repulic, Hungary, India, Israel, Japan, Mexico, New Zealand, Poland, Russia, South Africa, South Korea, Taiwan, and Thailand.
Financial Immunities says that Israel is ranked fourth in terms of market openness, i.e. its foreign trade/GDP ratio is very high and it therefore has one of the world's highest sensitivity to capital flows, while its foreign currency reserves are fairly low.
Published by Globes [online], Israel business news - www.globes-online.com - on September 8, 2008
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