The Ministry of Finance is presenting the 2015 state budget to Prime Minister Benjamin Netanyahu today. The planned budget includes a 3.18% deficit and no tax increases.
"The Ministry of Finance holds that in view of the indicators of some slowdown in economic activity, raising taxes is not the right thing to do," the Finance Ministry's announcement said. "The Ministry of Finance emphasizes that the response to the Ministry of Defense's demand for a budget supplement should maintain the spending framework that has been set. The budget prepared by the Budget Division is balanced, and includes a solution for the Defense Ministry's demands, and also for civilian social needs."
Ministry of Finance director general Yael Andorn said, "We regard preserving the spending framework as important. The budget that will be presented to the prime minister reflects the correct balance between the deficit target, the Defense Ministry's demands, and a civilian economic agenda."
Netanyahu to decide on NIS 30 billion defense budget supplement
The prime minister and his advisors, the Minister of Finance, senior Finance Ministry officials, and the Governor of the Bank of Israel will meet today around noon for a marathon discussion in another attempt to reach a decision on the Defense Ministry's demands for a budget supplement of up to NIS 30 billion for the coming years in the wake of the cost and lessons learned from Operation Protective Edge. The meeting follows the prime minister's call to increase the defense budget without raising the deficit target above 3%, as demanded by the Finance Ministry.
In recent weeks, this important dispute has been delaying the submission of the state budget for cabinet approval, and is liable to prevent Knesset approval of the budget before the end of the year, as required by law.
During the meeting, the Finance Ministry is expected to present its budget estimate for the costs of Operation Protective Edge, following work by combined teams of the Finance and Defense Ministry, which have been checking reports made during the operation on the extent of munitions used and the utilization of inventory.
The Defense Ministry estimates the cost of the operation at NIS 9 billion, and is demanding the full sum this year in order to enable it to renew its inventory and restore the level of preparedness to its pre-Operation Protective Edge level. The Finance Ministry believes that the real cost of the operation is much lower. Among other things, the Finance Ministry has claimed that the Defense Ministry did not deduced from the operation's costs the regular costs originally allocated for IDF activity during the period of the operation, which lasted for almost two months. The Finance Ministry also asserts that the IDF used ammunition after its use-by date, and is not entitled to reimbursement for its use.
The principal dispute concerns the Defense Ministry's demand for a NIS 11 billion budget supplement in 2015. The Finance Ministry says that it cannot grant this demand without deviating from the binding fiscal rules for preparing the budget, because the spending rule allows the Finance Ministry to increase the budget framework for 2015 by only NIS 8 billion, and the Finance Ministry has announced that it does not intend to allocate all of this amount to the Defense Ministry, given the rise in the other ministries' needs and the erosion of civilian services.
The Finance Ministry is also angry about the Defense Ministry's demand for a third budget supplement, amounting to NIS 8-10 billion over five years, which the Defense Ministry has earmarked for developing a solution for the tunnels, expanded procurement of the new Namer armored personnel carrier (APC), and procurement of Trophy systems for protecting tanks and APCs against anti-tank missiles.
Published by Globes [online], Israel business news - www.globes-online.com - on September 14, 2014
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