Cabinet approves extra NIS 3.3b budget for evacuees

Minister of Finance Bezalel Smotrich credit Noam Moskovich Knesset Spokesperson
Minister of Finance Bezalel Smotrich credit Noam Moskovich Knesset Spokesperson

Minister of Finance Bezlalel Smotrich has not presented any major cuts to fund the extra budget but still insists the fiscal deficit will narrow to 6.6%.

Israel's cabinet today approved a 2024 budget increase of NIS 3.3 billion, as proposed by Minister of Finance Bezalel Smotrich, most of which will be used to assist evacuees. The proposal did not appear on the cabinet's agenda for today but was added at the last minute.

The money includes grants to the evacuees from the north and Gaza border area and payments to house them in hotels. NIS 250 million will be used for treatment of those harmed by the October 7 events and NIS 200 million will be allocated for extra army reserve duty payments.

While all parties recognize these funds as essential, there is a dispute between the political leadership and senior officials at the Ministry of Finance because Smotrich has three times stressed in announcements that the extra funds can be found, "Without increasing the deficit."

If extra government spending does not widen the deficit, it must be balanced with measures to increase state revenues, or cut other state budgets. But Smotrich has not presented any such measures, except for a proposal to cut NIS 46 million from the government coalition funds - a modest amount. Last week Smotrich clashed with Budgets Commissioner Yogev Gradus over this extra budget and ordered him to prepare for the extra budget or resign.

Accounting exercise only

Smotrich's proposal also includes additional budgetary sources to cover the costs of the evacuees expenses in September, such as diverting NIS 100 million from urban renewal plans, NIS 84 million from agreements with local authorities, NIS 20 million planned for the establishment of Kiryat Shmona University, and NIS 10 million originally allocated to the state's participation in payments to parents for education and enrichment programs.

But this is only an accounting exercise. Not a single shekel will actually be cut from the coalition funds for the needs of the hour, and the other sources presented by Smotrich are also only on paper.

The budget for the current evacuation plan ends this week. Smotrich will not have enough time to legislatively amend the budget by this time - a process that requires about a month's work. So, as a temporary solution, it was decided to finance the continuation of the evacuation from the existing budget, as a loan only. After the updated budget is approved, all diverted amounts will be returned to their original source.

Smotrich said, "Contrary to the gloomy media forecasts, Israel's economy is strong and the indicators show this, and due to an increase in revenues, the current legislation does not increase the expected annual deficit, which still stands at 6.6%."

It is true that the Israel Tax Authority has collected NIS 3 billion more than expected this year - just below the amount of the extra budget. But by definition, Smotrich's intention to pass a third budget bill for 2024 will result in a higher deficit than the accepted professional alternative of finding sources, within the existing budget. If a real source had been found, Smotrich would have been spared the need to pass a Deficit Reduction Law - and then try to explain that it was not at the cost of increasing the deficit. Meanwhile, the deficit as of July stood at 8.1% - approximately NIS 30 billion more than the target Smotrich is still aiming for.

Published by Globes, Israel business news - en.globes.co.il - on August 25, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024. .

Minister of Finance Bezalel Smotrich credit Noam Moskovich Knesset Spokesperson
Minister of Finance Bezalel Smotrich credit Noam Moskovich Knesset Spokesperson
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