Far-right Israeli Finance Minister Bezalel Smotrich (Anadolu Agency)

Israel is seeking to reduce its expenditures under the weight of last year's budget deficit and increasing military expenditures due to the war on the Gaza Strip, amid a state of paralysis in the ministries awaiting the amended budget.

The actions of the Israeli Minister of Finance, Bezalel Smotrich, disrupted the approval of the occupying state's amended budget for the year 2024, which was supposed to increase public spending by 70 billion shekels ($18.9 billion), according to the Israeli newspaper Globes.

The government was also supposed to finish work this week for Knesset approval, and yesterday, Tuesday, was the deadline for approving the amended budget.

According to the newspaper, instead, there is a comprehensive cut in the budgets of all ministries, amounting to a total of 67 billion shekels ($18.13 billion) from government spending, according to an established legal mechanism.

The result, according to Globes, is that the government will now have to deal with an amount of NIS 137 billion ($37 billion) less than planned, meaning an additional NIS 70 billion on top of the forced reduction of NIS 67 billion, which is a gap of 30 billion shekels. % of the budget approved earlier in the year.

Infographic of Israel's economic losses due to the Gaza War (Al Jazeera)

Possible cuts

Since the beginning of the year, ministry officials have been living in a strange situation between possible cuts from their ministries’ allocations, to mitigate the blow of the jump in the deficit due to the expenses of the war on Gaza, and its indirect costs, which are estimated at about 255 billion shekels ($69 billion), while the Ministry of Finance presented a second reduction. A more moderate 5% budget cut, as well as other individual program cuts.

According to the newspaper, this week most ministries were temporarily paralyzed in their budgets, and are now awaiting the approval of the new budget in order to replace the significant reduction with a less harmful reduction.

directions

In an attempt to impose order and curb spending, the Accountant General of the Israeli Ministry of Finance, Yali Rotenberg, in early 2024, sent instructions to the ministries for the war period. These guidelines determine spending priorities and new initiatives and exclude expenses that are considered luxuries such as advertising or flights abroad, according to The newspaper.

The Accountant General explains that these guidelines will remain in effect, and may even be revalidated, after the across-the-board reduction has been implemented.

According to Globes, the budget items are still being discussed in the various Knesset committees in preparation for the second and third readings in the plenary session, and are scheduled to enter into force after final approval by Knesset members, early next month.

Until then, ministries will have to tighten their belts and postpone spending, according to the newspaper.

It quotes sources in the Ministry of Finance as saying that there will be no paralysis in government activities and that “creative solutions” will be found to transfer funds in urgent cases. At the beginning of the war on Gaza, when there was an unexpected need for funds for the army and the evacuation of the population and there was no budget framework. Approved, officials passed a more flexible policy and allowed “retroactive” adjustments in spending.

The newspaper asked: “Will officials show similar flexibility now to allow the government to bypass the law?”, adding that it is doubtful.

Source: Israeli press