Bank of Israel slams planned government grants

Amir Yaron  / Photo: Rafi Kotz, Globes

The Bank of Israel says government resources should focus on stimulating growth rather than universal grants.

The Bank of Israel has been critical of the new financial stimulus plan presented yesterday by Prime Minister Benjamin Netanyahu and Minister of Finance Israel Katz.

Despite warnings from the Attorney General Avichai Mandelblit not to engage in election economics, Netanyahu and Katz plan giving all Israelis from the bottom to seventh decile NIS 750 as well as grants to small and medium sized businesses, and incentives for the unemployed to return to work. "The principles of the economic plan were handed to the Bank of Israel a short while before it was published," the Bank of Israel said tersely and data is required in order to examine its necessity in light of the fact that the economy is set to soon come out of lockdown.

Following discussions today by the Bank of Israel Research Department, a statement said, "The plan lacks many details, which would allow the forming of a professional opinion about its costs and effectiveness."

Following the discussions, the Bank of Israel contacted Ministry of Finance officials and other sources in order to receive relevant details. When these details are provided, including analyses and supporting data, the Bank of Israel will examine its economic effectiveness and necessity.

However, the Bank of Israel did say, "Generally, dividing up public resources needs to be carried out according to economic effectiveness and the criteria by which the Covid crisis has hit. Dividing up universally in an undifferentiated way, such as the grant for every child program, without examining income is not effective. But we can already say that with the current situation of the economy and the rate of vaccinations, and given the existing security net and other steps recently taken to broaden them, the economic urgency of some of the assistance measures proposed in the presentation should be examined"

We can also say that as the economy approaches the stage of exiting from the lockdown, it is preferable to focus government support on measures to speed up growth that will contribute to the recovery of the economy being larger. This focus will refer budgetary resources, which anyhow are limited, to the many steps that are still required to grow the economy and increase productivity after the crisis.

Published by Globes, Israel business news - en.globes.co.il - on January 25, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Amir Yaron  / Photo: Rafi Kotz, Globes
Amir Yaron / Photo: Rafi Kotz, Globes
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