The Prime Minister's economic advisor and head of the National Economic Council, Prof. Avi Simhon, believes that there is no need to re-enact the 2024 budget following the war, and instead use an extra-budgetary box that will increase government debt. This is similar to what was introduced during the Corona period.
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The move could allow the government to avoid the saga of approving a new budget that is usually accompanied by a lot of political tension. In addition, in this way it will also be possible to partially or completely avoid sharp cuts in coalition funds and the closure of unnecessary government ministries, which are recommended by the professional echelon in the Ministry of Finance.
The main recommendation: taking "adjustment steps"
Simhon's idea speaks of the fact that there is no need to make a new budget, but rather it is enough to open an extra-budgetary box that will be designated for the defense budget of the war, and the rest of the civilian expenditures must be taken out of the existing budget. This means that there will still be cuts, but less than those recommended by the Treasury.
Votes on the 2023 State Budget, Photo: Oren Ben Hakon
In the meantime, work on the revised state budget for 2024 is underway, and recently Budget Department head Yogev Gradus sent his recommendations to Finance Minister Bezalel Smotrich for fiscal coping with the economic consequences of the war in 2024.
The main recommendation of the head of the Budget Department, Yogev Gradus, is to implement "adjustment measures" (cuts and tax increases), totaling NIS 25-30 billion.
Head of the Budget Division, Yogev Gradus, Photo: Oren Ben Hakon
On the agenda: cancellation of coalition funds, closure of 15-17 government ministries, tax increases, reductions in wages and pensions for public sector employees, cuts in the budgets of various government ministries, and more.
"All fiscal anchors for 2024 indicate the need to carry out adjustment measures totaling NIS 25-30 billion," writes Gradus. "This is under the current reference scenario regarding the duration and intensity of the fighting, according to which the amount of direct combat expenses minus US aid will be about NIS 2024 billion in 30."
If Simhon's proposal, which serves as Prime Minister Netanyahu's economic adviser, is implemented, it will be possible to partially or completely avoid the painful adjustment measures proposed by Gradus. However, it should be noted that even though technically an extrabudgetary box does not increase the budget deficit, it is still government debt, and it is not certain that the rating agencies will like it.
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