The postponement of the cabinet budget discussion until October has far-reaching consequences on the 2013 state budget, the deficit, and, most of all, on ministries' budget planning.
If the 2013 budget is not approved by January 1, the scenario with the highest probability, the automatic mechanism of monthly budgets based on 1/12 of the 2012 budget will be triggered, until a new budget is passed by the Knesset. In practice, this means immense fiscal restraints. Under the fiscal rule approved by the government, the 2013 budget was supposed to be NIS 13 higher than the 2012 budget, but if no budget is approved, the increase will be postponed.
A simple calculation shows that postponing the budget means will prevent an additional NIS 1.1 billion a month, on average, in spending. On the basis of the 1/12 formula, the Ministry of Finance will effectively save the planned budget increase, effectively carrying out the NIS 12-15 billion cut needed in 2013.
Ostensibly, the Ministry of Finance ought to love this mechanism, because it will allow the ministry to cut the budget without cabinet or Knesset approval, and most of all, without the need to confront MKs and ministers. But two top ministry officials believe that the mechanism is highly undesirable: Budget Director Gal Hershkowitz and Accountant General Michal Abadi-Boiangiu. They believe that the mechanism eliminates ministries' ability to plan their budgets. Abadi-Boiangiu, a former top Ministry of Health official, has experienced the effect of working without an approved budget, and has frequently said how hard it is to function and manage under such conditions.
Published by Globes [online], Israel business news - www.globes-online.com - on August 14, 2012
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