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Lieberman can relax: the economy is really not in a situation that requires a stabilization plan

The designated finance minister Avigdor Lieberman wants to be remembered as proposing a "second stabilization plan" but the economy itself is not in a catastrophic situation as it was in 1985. Avichai Snir has some more relevant proposals for the actions required in the ministry

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• Avigdor Lieberman

• Minister of Finance

Avichai Snir

Friday, 11 June 2021, 00:22

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I was once told a joke about someone who wanted to run away from the asylum and asked a friend of his to make the preparations for him. He equipped his friend with everything he needed, and asked him that if there was a fence - sixty ladders and if there was a wall - he would dig under it. When everything is ready, he will come back and report at what time it is best to make the escape. After a few minutes the friend returns and reports that there is no way to escape because it is impossible to dig under the wall because there is not one, and it is impossible to place ladders on the fence because it is not there.

I was reminded of this old joke when I read that the designated finance minister, Avigdor Lieberman, is interested in making history as the one who made a second stabilization plan. I have bad news for the finance minister: he will not go down in history as the one who implemented a stabilization plan, because the one thing the economy does not need is stabilization.

It is true that the country's debt has risen in the wake of the corona, and inflation is also raising its head a bit.

But even if we end the year with a public debt of 75% or 76% of GDP, it is still not a 200% debt like in 1985, when they did the stabilization plan.

Inflation this year is also expected to rise, but inflation of about 2% or a little more, is not really 450% inflation, as in 1985.

Besides, the main problem in 1985 was the shortage of dollars: Israel imported far more than it exported, and by 1985 the government had come close to a point where there would not be enough money to import fuel and food.

Today, however, Israel has no shortage of dollars.

On the contrary, the Bank of Israel works overtime to purchase the dollars that enter the economy to prevent the shekel from strengthening too much.

More on Walla!

He saved the country but died quietly - why?

To the full article

Avigdor Lieberman (Photo: Reuven Castro)

There is no shortage of things to do in the Ministry of Finance

If the finance minister really wants to get the economy back on track, first of all he should appoint some good economists for the vacancies

So any attempt to compare what the current finance minister will do to the 1985 plan is irrelevant. All the next finance minister needs to do is cancel all the additional payments the state is making due to the corona crisis, and perhaps some more wasteful plans created by the two previous finance ministers, and Israel will automatically return to the deficit reduction route.

It's not that the next minister has nothing to do. It could, for example, fully open up the market for food imports. It can make public service reforms to reduce bureaucracy and streamline service to citizens and businesses. It could force the military to make painful cuts to divert more resources to investment in transportation, communications and education.

But before all that, there is one more thing he needs to do. In 1985, Finance Minister Modai did not plan the stabilization plan himself. The program came from a team formed by the then director general of finance, Emanuel Sharon, together with several academics from Israel and abroad. The minister gave them backing, but the plan came from the professionals.

Today, there is no chance that such a thing will happen.

Recent ministers have tried to use the Ministry of Finance as a source of political gain, so instead of the ministry working collaboratively between officials and the minister, the ministers have tried to subject the ministry’s policy to their political needs.

It did not work for the ministers, and it hurt the Ministry of Finance.

If the finance minister really wants to get the economy back on track, first of all he should appoint some good economists for the vacancies.

Then he will decide on the goals that are most urgent to address, and will do so.

It may not be a stabilization program, but it will still be excellent.

Dr. Avichai Snir - Netanya Academic College and Bar-Eyal University

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