A Two-Year Budget It Will Be, With Modifications

Prime Minister Binyamin Netanyahu and Minister of Finance Moshe Kahlon have agreed on Sunday to drawing up a two-year budget, ending weeks of haggling and speculation, Globes said.

Kahlon dropped his objections to a two-year budget for Israel in 2017-2018 after a second meeting with Netanyahu, during which he was promised that he could change the 2018 budget in November 2017, if the economic situation warrants a revision.

The second meeting included senior officials from the Ministry of Finance and the Bank of Israel, who had been assured they would have a voice in the decision.

Participants included Ministry of Finance director general Shai Babad, Governor of the Bank of Israel Karnit Flug, Bank of Israel Macroeconomics and Policy Division head Adi Brender, Ministry of Finance budget director Amir Levy, deputy budget director for macroeconomics Yael Mevorach, Accountant General Michal Abadi-Boiangiu, and chief economist Yoel Naveh.

The budget experts reiterated their opposition, pointing to the difficulty in predicting revenue a year in advance. Levy and Mevorach also argued that the government’s ability to make spending decisions will be even more limited than in the past, due to the use of the numerator – a restraining mechanism, which on the one hand prevents the government from assuming uncovered liabilities, while on the other hand reduces flexibility in budgetary decision-making when there is an urgent need, for example a security or economic crisis.

It was agreed at the meeting to establish an assessment and control mechanism at the end of 2017 that would facilitate changes in the event of a deviation from the revenue forecast. Definition of the mechanism’s authority will be formulated in the coming days by joint Ministry of Finance-Prime Minister’s Office work teams.