By The Jerusalem Post (World News) | Created at 2024-10-30 15:35:08 | Updated at 2024-11-06 03:44:20
6 days ago
The budget outline includes closing five ministries and numerous budget cuts to ministries, which may bring resistance from ministers and slow its passage through the Knesset.
By ELIAV BREUER, EVE YOUNG OCTOBER 30, 2024 16:46 Updated: OCTOBER 30, 2024 17:11
FINANCE MINISTER Bezalel Smotrich speaks at a news conference at the Finance Ministry in Jerusalem, last week.
(photo credit: Chaim Goldberg/Flash90)
The Finance Ministry sent an outline of the 2025 budget to Israel's ministers on Wednesday, ahead of a government meeting on Thursday, at which the ministry is looking to approve the outline.
The budget is aimed at buoying Israel's economy through the significant challenges and costs of the Israel-Hamas war, which has seen growth projections slashed and the country's credit rating lowered.
The 2025 budget will be focused on economic recovery from the damages of the war, said Finance Minister Bezalel Smotrich at a press briefing Tuesday, adding that he anticipates that 2026 will be a year when it is possible to roll back many of the cuts and adjustments made.
Smotrich also acknowledged that the 2025 budget might not pass before the end of the calendar year. While some tax adjustments meant to contend with the economic impacts of the war should pass by the end of November to give the tax authorities time to implement them, other parts of the budget will pass later, he said. This would mean that the government will have to operate based on the 2024 budget in January, until the 2025 budget is approved and implemented he said.
The minister emphasized a number of principles for budget changes and cuts that are part of an attempt to cut NIS 40 billion total including that steps taken should not be too harsh, and that all steps must be those that can be passed by Israel's government and in its Knesset.
Among cuts and measures laid out in the ministry's plan is a widespread freeze on government stipends - including for the weakest socioeconomic groups, bereaved families, holocaust survivors and more.
This freeze on stipends, which are set to update as inflation raises the cost of living, is equivalent to a cut, especially as Israel's inflation is expected to continue to rise.
The average wage (used to calculate the minimum wage and other wages) and minimum wage will also be frozen, along with updates to tax brackets, meaning cuts will likely be felt by all Israelis.
The minister responded to concerns that some of the cuts will harm Israel's most socioeconomically vulnerable, saying that budgets will be set aside and the ministry will identify those who are significantly harmed by the stipend freezes.
When addressing the issue of the haredi draft and budgets for haredim, Smotrich remained ambiguous. A haredi draft is seen as a measure that could lighten the load on Israel's reservists, which continues to have significant economic impacts as reservists are kept out of the workforce.
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As the haredi sector's part in Israeli society grows, the issue of a haredi IDF draft and participation in the workforce with lower than average productivity due to lack of preparation in the haredi education system are seen as growing challenges to Israel's economy.
The minister also acknowledged the social implications of the ongoing illegal situation, where an increasing number of non-haredim are reporting for duty while their haredi brethren are not, but he did not commit to supporting financial sanctions to discourage the continuation of this situation.
The budget outline includes closing five ministries, the minister said Tuesday, but added that this will not cut a significant amount from the budget and did not specify which ministries.
The plan also includes numerous budget cuts to ministries, which may bring resistance from ministers and slow the passage of the plan in the government.
Among cuts to ministries, the budget outline includes a cut to the Transportation Ministry's development budget which includes infastructure projects and support for public transportation. It also included cuts to Health Ministry budgets including reducing budgets for training for nurses and caregivers and support for Israel's Kupot Holim (health maintenance organizations).
The minister continued to highlight his plan to fight the black market and tax evasion, proposing limits on the maximum ammounts allowed for cash purchases.
One day before sending the budget plan to other ministries, the finance ministry revised its growth projection for 2024 and 2025 on Tuesday, lowering predicted GDP growth for 2024 to 0.4% and for 2025 to 4.3%.
This revision follows the expansion of the war to the northern front, the ministry explained, saying that the previous prediction had been based on the assumption that the war’s intensity would continue to be as it was in September and that fighting would end after Q1, 2025.
The updated base case assumes that intense fighting will continue through most of the last quarter of 2024, which will continue to mandate a significant reserve call-up. The ministry assumed that this will be followed by a reduced call-up throughout 2025.
