Cabinet approves extra NIS 3.3b budget for evacuees

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

The funds include grants for those displaced from the north and the Gaza border area and payments for their accommodation in hotels. NIS 250 million will be used to treat those affected by the events of October 7, and NIS 200 million will be allocated for additional payments for reserve service in the army.

While all parties acknowledge that this money is necessary, there is disagreement between the political leadership and senior officials in the Finance Ministry, because Smotrich stressed three times in his statements that additional funds can be found, “without increasing the deficit.”

If the additional government spending does not widen the deficit, it must be balanced by measures to increase state revenues, or by cuts to other state budgets. But Smotrich has not proposed any such measures, other than a proposal to cut NIS 46 million from the government coalition’s funds — a modest sum. Last week, Smotrich clashed with Budget Commissioner Yogev Gradus over the additional budget, ordering him to prepare for the additional budget or resign.

Accounting exercise only

Smotrich’s proposal also includes additional budgetary sources to cover the expenses of the September evacuees, such as the transfer of 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 earmarked for state participation in payments to parents for education and enrichment programs.

But this is just a math exercise. Not a single shekel will be cut from the coalition’s funds to meet the needs of the hour, and the other sources Smotrich presented are also only on paper.

The current evacuation plan budget expires this week. Smotrich will not have time to amend the budget legislatively by then – a process that would take about a month of work. Therefore, as a temporary solution, it was decided to finance the continuation of the evacuation from the current budget, only as a loan. After the updated budget is approved, all transferred amounts will be returned to their original source.

“Contrary to the gloomy media forecasts, Israel’s economy is strong and the indicators point to that, and due to the increase in revenues, the current legislation does not increase the expected annual deficit, which still stands at 6.6%,” Smotrich said.

True, the Israel Tax Authority collected NIS 3 billion more this year than expected – slightly less than the amount of the additional budget. But by definition, Smotrich’s intention to pass a third budget bill for 2024 will result in a deficit higher than the accepted professional alternative of finding sources, within the current budget. Had a real source 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 expense of increasing the deficit. Meanwhile, the deficit as of July stood at 8.1% – nearly NIS 30 billion more than the target that Smotrich still aims to achieve.

This article was published in Globes, Israeli Business News – en.globes.co.il – on August 25, 2024.

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