Unemployment in Israel has already crossed the 500,000 threshold. National Insurance Institute (NII) director general Meir Spiegler promised to make every effort to make sure that all those filing unemployment insurance claims would receive a first payment, and even an advance, before the Passover holiday. This requires cooperation from employers, who must send Form 11 to NII, but the big question is whether the state has enough money to pay unemployment benefits to half a million people.
The average monthly benefit is NIS 6,500 per person. NII estimates that the total cost of unemployment benefits will jump from NIS 320 million to NIS 900 million in March. In April, the state will have to pay NIS 3.5 billion, and the numbers are liable to rise even further afterwards - under the Ministry of Finance's most pessimistic current scenario, unemployment will rise to 1.2 million people.
The only resource now available to NII for paying unemployment benefits to the new masses of unemployed is a NIS 9.5 billion surplus in NII's budget - the different between NII's revenue and the provisions in the original 2020 budget forecasts.
NII was supposed to use this money to purchase government bonds, and the halt in these purchases is creating a NIS 9.5 billion shortfall in the state budget. Will this be enough? It is likely that NII's revenue from the private sector has also been severely affected, so the state of its cash flow is unclear. Even if NII does has NIS 9.5 billion, however, it is fairly clear that it will not be enough to meet all of the needs.
In the bottom line, it is clear that sooner or later, NII will need an injection from the state budget in order to pay unemployment benefits to all of those filing claims. This will increase the budget deficit beyond the shortfall created by the halt in bond purchases.
Ostensibly, NII has a capital fund containing the surpluses with which it purchased state bonds. This fund was accumulated from NII's surpluses each year, with the idea that the money saved in it would enable NII to close its budget, given projections that in the future, its operating surplus will become a deficit. According to NII's reports, the huge amount of NIS 250 billion involved can suffice for many years. The problem is that this sum represents only a commitment by the state to pay it to NII. No such fund actually exists; the money has not been deposited in any bank.
A struggle has taken place in recent years between NII and the state. NII wants its collection surpluses kept in an independent fund separate from the state budget and under its control, and which will invest the money in the same way that other financial institutions invest their money. The state, which needs NII's surpluses in order to make up its budget, is resolutely opposed to this. The state argues that the current alternative is also better for NII than investment in the capital market, because the state bonds sold to NII provide a guaranteed return. This argument is especially valid in crisis periods, when the stock market falls steeply. This assumes, however, that the state will meet its commitment to pay NII the money it lacks from the money transferred to the government over the years.
Published by Globes, Israel business news - en.globes.co.il - on March 23, 2020
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