Top Ministry of Finance budget officials are furious at the Bank of Israel, which stated in its "Recent Economic Developments - September-December 2011" report that there is an unprecedented NIS 6.4 billion budget hole in 2012, due to unfunded commitments.
"The Bank of Israel should first look at itself. For example, they could check - and tell the public - what is the cost to the economy of holding foreign currency reserves. These reports do harm, and cause unnecessary panic," a top Ministry of Finance official told "Globes" in response to the report.
Israel's foreign currency reserves total around $74 billion. The interest rate gap between Israel and Europe and the US causes the Bank of Israel to "lose money" on dollar purchases, which are one of its controversial measures of its monetary policy, and which have been the focus of some sharp criticism.
The Ministry of Finance official added, "It's true that the budget is very tight, and there is significant budget exposure, but every knowledgeable person knows that it is technically impossible to spend more than what is stipulated in the budget law."
The Bank of Israel also stated that, due to huge overspending, compared with previous years, it is impossible to use administrative tools to close the budget breach.
Another Ministry of Finance official said in response, "As of now, the budget framework has not been breached, and it won't be. Moreover, there is no intention of breaching it. We are mandated by law to meet the spending framework. There is no need now for more cuts in addition to those already made, which were intended to finance supplements to the defense budget. It is true that there are pressures to increase spending. Every ministry is committed to act with restraint and not to initiate changes with budget significance. The government will also have to stop populist legislation."
Published by Globes [online], Israel business news - www.globes-online.com - on February 16, 2012
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