Jerusalem, 31 December 1998

ISRAEL’S FOREIGN CURRENCY BALANCE 1998-1999

(Communicated by Finance Ministry Spokesman)

On Tuesday, 29.12.98, Accountant-General Shai Talmon announced that, during the course of 1998, the Government of Israel raised a total of $2.6 billion in foreign currency for the sake of financing its foreign currency expenses. In so doing, Israel succeeded in fully implementing its plans to raise foreign currency, despite the predicament of international financial markets, which face greater uncertainty and crisis. Talmon emphasized that the Government’s presence in international financial markets makes it possible to establish a benchmark for banks and other corporations.

The 1998 target was reached as follows:

* In January 1998, the Accountant-General raised the balance of funds from the US Government loan guarantee program — amounting to $1.416 billion over 30 years, at 6.03% rate of interest.

* On 10 December 1998, the Government raised about $250 million via 30-year Yankee bonds at 7.25%.

* About $875 million was raised through the Israel Bonds ("Independence and Development Loans") organization, in the form of bonds to redeemed within the next 15 years.

* About $40 million was raised on credit from various European institutions.

The Accountant-General added that the State of Israel’s international credit rating, and the perception of Israel as a technologically advanced country with great potential for growth, have, in recent years, created the conditions for international financial activity that has facilitated the achievement of strategic goals — such as the penetration of financial markets, the creation of new sources of financing, the opening of international markets to Israeli business through establishing reference points for the Israeli economy, the re-composition of the national debt.

According to Talmon, the State of Israel’s plans to raise foreign currency (about $2.4 billion) in 1999 incorporate its desires:

* to strengthen Israel’s ability to raise funds in international financial markets through independent bond issues,

* to establish a benchmark which will enable Israeli firms to raise low-cost capital in these markets,

* to examine the united European market and its activities, in the wake of the 1.1.99 introduction of the Euro currency,

* to preserve its ability to raise capital through various channels — such as banking syndicates and the Euro Medium Term Notes (EMTN) program.

With these objectives in mind, The Accountant-General has identified five sources from which to raise the required funds:

1. In the event that the Euro proves to function as a stable currency, and that certain other relevant conditions are met, the Accountant-General will float a preliminary and experimental issue of $200-300 million on the Euro market.

2. After evaluating developments influencing the global banking system, in light of recent crises (particularly in Japan), about $150 million will be enlisted through a European banking syndicate.

3. About $550 million will be raised through the EMTN program, as either private loans or public financing.

4. About $900 million will be raised by the Israel Bonds organization. (Talmon indicated that emphasis will be placed on lowering organizational costs, selling bonds to individual investors and Jewish communities, and presenting Israel Bonds as an alternative avenue for raising institutional capital.)

5. The balance of the funds will be raised by taking advantage of the flexibility given to the Accountant-General vis-a-vis the use of the deposit from the US Government loan guarantees.