Government Expenditure Measures Effectively Control Inflation in Israel's Economy

In 1985, Israel was grappling with an unprecedented economic crisis characterized by hyperinflation, which peaked at an alarming rate of 480% per annum, making it the highest in the world at that time. In response to this dire situation, then-Prime Minister Shimon Peres introduced an emergency economic stabilization plan aimed at restoring economic stability. This comprehensive plan included stringent measures such as price controls and significant cuts in government expenditure. These actions were pivotal in successfully curbing inflation and stabilizing the economy. A notable aspect of this plan was the introduction of a new currency; the old Israeli shekel was replaced by the Israeli new shekel at a conversion rate of 1,000 old shekels to 1 new shekel. This monetary reform was a crucial step in rebuilding public confidence in the economy and facilitating a return to normalcy. The stabilization plan not only addressed immediate economic challenges but also laid the groundwork for future economic policies in Israel, marking a significant turning point in the nation's economic history.