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Israeli Cabinet sets budget cap as US presses reform

The Israeli Cabinet, under mounting pressure to salvage the nation's floundering economy, Sunday set a limit on 1984 government spending but did not resolve a dispute over allocations among the various ministries.

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The Israeli Cabinet approved Finance Minister Yigal Cohen-Orgad's proposal to set a $20.1 billion ceiling - about the same amount as was budgeted for last year. Although allocations among ministries were referred to an economic ministerial committee, it was clear there would be no freeze on Jewish settlement in occupied Arab territories, as Mr. Cohen-Orgad had recommmended.

Meanwhile, Israel Radio reported that the US, ''not impressed'' with austerity measures taken to date, has warned Israel it must get its economy in order before Washington approves additional aid.

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