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Army and Security
Finance v Ministry of Defense: Proposal to finance the billion-dollar deal - bypassing the state budget
The deputy head of the budget department sent a scathing letter to the director general of the Ministry of Defense in which he clarified that the model he presented for financing the purchase of the aircraft from the US would lead to budget overruns during an economic crisis. Without budgetary source
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Ministry of Defence
Ministry of Finance
F-35
Amir Bohbot
Sunday, October 25, 2020, 9:15 p.m.
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The Deputy Head of the Budget Division in the Ministry of Finance, Yogev Gardos, today (Sunday) sent a scathing letter to the Director General of the Ministry of Defense, Maj. Gen. Amir Eshel, in which he expressed opposition to the Air Force's multi-billion dollar
deal
.
F-35s and F-15s, KC-46 refueling aircraft, heavy transport helicopters whose identities have not yet been decided and advanced armaments, have gained momentum from the Ministry of Defense in recent weeks.In favor of funding, the ministry seeks to defer repayment of previous loan arguing that the move could lead to billions of dollars in debt that exceed the budget available to the Ministry of Defense.
To read the full letter
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The Ministry of Defense is working to speed up the deal (Photo: Reuters)
In 2014, the Department of Defense was forced to apply for an external loan to realize the Evacuation Squadron deal at the expense of future U.S. aid, and has since suffered an acute funding problem.
The Ministry of Finance then approved the loan and gave guarantees, but after the Ministry of Defense raised the current model, which would increase the existing loan, the Ministry of Finance decided to strongly oppose it.
The opposition stems from the fact that in 2028, the $ 3.8 billion-a-year US security assistance contract will end.
The Treasury fears that if the US administration decides to cut the budget, Israel will have to bridge the financial gaps and realize the guarantee in billions of dollars, while exceeding the state budget.
Ignore the alternatives proposed by the Ministry of Finance.
Ganz and Eshel (Photo: Elad Malka)
Senior security officials have argued that the expensive deal is critical to state security, and therefore the signing process should be speeded up.
Simultaneously, the talks between the IDF and Ministry of Defense Ministry of Finance towards presenting a model of financing the transaction. Ministry of Finance did not like, to say the least, a model and transferred the message in the usual way in closed forums.
The Ministry of Finance presented the IDF Planning Division and the Ministry of Defense for alternative ways to finance the transaction , Such as changing priorities within U.S. aid funds.
Thus, for example, the purchase of fuels can be postponed or reduced due to the steep decline in the volume of training this year.
The Treasury also proposed paying for some of the aircraft in shekels instead of dollars, or seeking the approval of all government ministries to allow for the budget overrun in procurement.
However, after realizing in the Treasury that the Ministry of Defense intends to ignore the comments and present the model to the Ministerial Committee on Equipping, it was decided to issue the letter.
Already at the beginning of the letter, entitled "Use of a budget bypass mechanism for the procurement of government ministries," Gardos wrote that the Ministry of Defense's request to finance the deal "does not match the accepted budgetary methods in the country."
The acting head of the Budget Division also clarified that "taking an external loan for the budget is an explicit circumvention of the basis of the method for determining the budget of the State of Israel."
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To the full article
"Ministry of Defense commits to higher budget than allocated to it"
Gardos claimed that the action that the Ministry of Defense is seeking to take these days to implement the deal is a type of mechanism that circumvents section 40A of the Budget Basics Law, which stipulates that a balancing action must be presented for every new decision.
"The balancing action proposed in this case is a deferral of payment of expenditure that has already been made, and creates a situation where in 2023-2022 the Ministry of Defense actually commits to a budget higher than the budget allocated to it, with no budget source or balancing action," it read.
"Another problematic aspect of the Defense Department's proposal is taking on another significant commitment without recording it in the state budget."
The letter revealed that the cost of financing the loan is estimated at $ 217 million, which may be paid from the state budget.
The acting head of the budget department defined the operation as "a covert prioritization of defense spending over other spending in the coming years."
"The government should avoid budget evasion mechanisms."
Gardos (Photo: Ministry of Finance)
Towards the end, Gardos emphasized that his request did not deal with the quality of the security need presented by the IDF, as it is clear to everyone that the need for urgency and implementation of the deal is clear. "Therefore, in our position, especially at a time of such widespread economic crisis. "Adherence to the fiscal rules that it itself set and approved by the Knesset, and to avoid mechanisms that circumvent the budget," it was written. The
Ministry of Defense has not yet responded.
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