British Mandate: A Survey of Palestine: Supplement - Page 109

purchasing power of the Palestine pound as equal to approximately 50 per cent. of that of the pound sterling at the end of 1946.

This disparity between the actual purchasing power of the two currencies, in spite of the free convertibility, pound-for-pound, which exists between them, arose in the course of the war years and has persisted as a result of the continuation of the influences which originally brought it about. The most important of this influences was, and is, the volume of expenditure by the armed forces in the country. The importance. of this expenditure may be gauged from the fact, that while the whole national income of the country in 1939 amounted to £P.30 million, military expenditure in the peak year (1943) amounted to no less than £P.31.5 million.

The estimated annual expenditure by the military forces in each year from the commencement of the war to date was as follows :-

LP. millions
1989 2.G
1940 8.5
1941 20.7
1942 25.4
1943 3J.5
1944 25.0
1945 24.3
1946 23.5
--
Total 161.5 For particulars of the effect of this expenditure on the price level, reference should be made to "National Income of Palestine, 1944", by P . .J. Loftus. The expansion of the incomes of wage and salary earners is discussed on page 735 et seq. of the Survey of Palestine.

Subsidiary influences on the inflation of prices in Palestine were:-

(i) the curtailment of supplies for which Palestine had previously been dependent on overseas sources and the inadequacy of focal resources to produce replacement goods in anything approaching sufficient quantities to overtake the deficiencies;

(ii) the regimentation of supply arrangements by the Allied supply authorities which brought Palestine into relation with prescribed sources of supply and noticeably made the country reliant for certain staple commodities on the Middle East group

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