The battle over the 2018 budget reserve is set to begin next week. The Ministry of Finance will present its updated forecast for 2018 to the government on Sunday, with an expected 2.8% budget deficit, compared with a 2.9% deficit in the budget law. According to the adjustment mechanism inserted into the two-year budget law, if, at the end of 2017, the projected 2018 budget deficit does not exceed the legislated target, the NIS 3.5 billion reserve in the 2018 budget can be released. The adjustment mechanism was added as one of the lessons of what happened in 2011-2012, when it became clear in 2011 that there would be a substantial deviation from the deficit target in 2012, the second year of the two-year budget. The release of the budget reserve is expected to lead to a free-for-all among the government ministers for the use of the money.
Competing for funds that will be released are Minister of Finance Moshe Kahlon's family assistance plan (a total cost of NIS 4 billion), his industrial assistance plan (NIS 1-1.5 billion), Prime Minister Benjamin Netanyahu's plan for increasing allowances for people with disabilities (a gradual cost of NIS 1.3-4 billion), the demand by Minister of Defense Avigdor Liberman for a NIS 4-5 billion defense budget settlement following developments on the Syrian front, and many other demands raised by other ministers, not to mention the salary increments demanded by the teachers' unions, high school teachers, and others.
The Ministry of Finance is assuming that the Knesset will pass the tax on owners of three or more housing units during the year (according to Kahlon's statement) and that this will contribute NIS 400 million to the state's tax revenues (compared with NIS 900 million in the original estimate for the 2017 budget).
Proving itself
In addition to the 2018 forecast, the Ministry of Finance will present to the cabinet the deviations from the framework for the multi-year budget for 2019-2021, according to a revision of a forecast presented last May. The growth forecast for the next three years has since been upwardly revised, following positive market data. On the other hand, the spending ceiling has been downwardly revised because the Consumer Price Index readings have been lower than expected.
The 2019 revenues forecast has been raised by NIS 1 billion to NIS 353.5 billion. Spending for 2019 has been increased by NIS 1 billion, mainly because of changes in spending flows in the framework of the project for moving IDF camps to southern Israel (Shoham 3), an increase in the number of Holocaust survivors found eligible for welfare payments, and a rise in education spending. The Ministry of Finance says that the mechanism requiring the government to present a budget resource for every commitment it makes is proving itself. There is a significant drop in spending commitments made by the government in 2017, compared with previous years, and the government has actually made no decision to increase spending without a source to cover it.
Published by Globes [online], Israel Business News - www.globes-online.com - on October 26, 2017
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