The Israeli government meeting concluded last night without the ministers reaching a consensus on the amended budget proposal for the current year 2024, according to the Globes newspaper specializing in the Israeli economy.
The newspaper said that the objections came from key ministers in the government, including National Security Minister Itamar Ben Gvir, Economy and Industry Minister Nir Barkat, Education Minister Yoav Kisch, and National Unity Party ministers Benny Gantz and Gideon Saar.
Sources in the Israeli Ministry of Finance revealed – Monday morning – that due to widespread disagreements, a decision on some of the amendments submitted within the budget proposal may be postponed until the next government meeting scheduled to be held next Sunday.
The newspaper quoted sources as saying that among the postponed plans are initiatives aimed at revitalizing the troubled real estate sector and addressing issues within the black economy (unregistered business operations and tax evasion) to generate additional tax revenues.
According to Globes, the government’s main point of contention revolves around proposed budget cuts to ministerial allocations, which aim to redirect funds toward ongoing war efforts and rehabilitation of damaged settlements.
The proposal includes a uniform 3% reduction in the budgets of government ministries, in addition to a significant reduction of 3.5 billion shekels ($1 billion) in government programs. In addition, a reduction of NIS 2.5 billion ($700 million) from the total NIS 8 billion ($2.2 billion) allocated to coalition parties is being considered.
Fears
The most significant tax measure outlined in the revised budget is a proposed 1% increase in the value-added tax rate starting in 2025. Prime Minister Benjamin Netanyahu, who initially opposed the value-added tax increase, has acquiesced.
The Governor of the Bank of Israel, Amir Yaron, was one of the participants in the government session, and expressed his concerns about irresponsible financial behavior, stressing the basic health of the Israeli economy.
He stressed, “The Israeli economy is fundamentally sound and has the characteristics required to flourish when the war ends as well. But this will not happen automatically. It is important to remember that economic growth depends first and foremost on a stable economy and investor confidence.”
Since the Israeli war on the Gaza Strip, Israel’s economy has suffered a gradual recession, as sectors have suffered from almost complete paralysis, and other sectors have continued to have minimal activity, amid a blackout from official authorities regarding the results of the last quarter of 2023.
The governor stressed the crucial role of government policy in overcoming current challenges while maintaining fiscal responsibility, noting that it will be crucial to the economy’s ability to recover from the effects of war and quickly return to growth.
