Flug Fine on Two-Year Budget – If It Meets Criteria

A potential major obstacle to Israeli Prime Minister Binyamin Netanyahu’s plans for a two-year state budget was cleared away on Thursday after a meeting with Bank of Israel Governor Karnit Flug.

Flug told the prime minister that the issue was not one year or two years, as long as certain safeguards are in place, Globes reported.

The governor said it was best “to avoid problems we have seen in the past with a two-year budget, for example the accumulation of long-term liabilities it would difficult to meet later. The numerator (a tool that makes it possible to constantly monitor the government’s budget liabilities), which has been put into operation, can help verify definitely that long-term liabilities are not being accumulated.”

“I think that predicting the future is more difficult in the longer term. In particular, if there is a deviation, it can accumulate for a long time, so if you leave a larger reserve in the budget, you can cope with a two-year budget.”

A two-year budget would require flexibility to meet changing conditions, and so she recommended keeping down the number of items in the budget.

In addition, she stressed the importance of focusing now on the long-term support for future growth engines. The high-tech sector, long a recognized engine of the economy, has suffered stagnation, according to recent reports.

With those points in mind, Flug told Netanyahu, she thought he could go ahead with the two-year framework, if he so chooses.

She reportedly did not discuss the political considerations—avoiding the destablizing effects of an annual budget battle—which is said to be motivating Netanyahu.