The Ministry of Finance is preparing to cut the Ministry of Defense's 2012 defense budget by NIS 3 billion. However, internal Ministry of Finance sources say that such a cut, if imposed, which is by no means certain, might not be enough in light of global economic developments.
At the same time, an across the board cut affecting all government ministries except the Ministry of Education, is being prepared for if the economic situation deteriorates. The Ministry of Finance senior officials are meeting more and more frequently on this matter and plans are being coordinated by director general Doron Cohen and accountant general Michal Abadi-Boiangiu, who for several months has felt there has been a gap between forecasts and reality.
Tax collection as of November 2011 is already NIS 5 billion below the target of NIS 213.5 billion on which the 2011 budget was based. The gap stems from lower income in the first half of 2011 when exports to North America and Europe were lower than expected. The missing NIS 5 billion in taxes represents 0.6% of GDP.
The Ministry of Defense will not accept any planned cuts without a fight and officials there are already stressing that harming the defense budget will harm national security. Even if the cut is imposed, it will be balanced out by additions for the security fence along the Egyptian border and refunds for fuel excise worth NIS 1 billion. Defense officials are also emphasizing that cuts will harm the entire economy through lower orders for the defense industry, IDF suppliers in the periphery, R&D and layoffs in the security forces and IDF, and a slowdown in defense exports.
Published by Globes, Israel business news - www.globes-online.com - on November 28, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011