2021-22 Budget Clears Knesset Finance Committee

YERUSHALAYIM (Reuters) -
Aerial view of the Knesset. (Moshe Shai/FLASH90)

The Knesset Finance Committee on Thursday approved the 2021-22 state budget, the Knesset said, clearing a key hurdle and paving the way for a final vote in the full plenum.

Failure to give the spending package final approval by Nov. 14 would trigger snap elections. If approved, it would be Israel’s first ratified budget in more than 3½ years.

The vote followed “heated” marathon sessions that started on Tuesday and ended around 3 a.m. on Thursday due to some 30,000 reservations by opposition parties.

Before the vote, the Finance Ministry added NIS 10 billion ($3.1 billion) to the reserve budget for 2022 to deal with the COVID-19 pandemic’s fourth wave.

The ministry on Monday trimmed its 2021 budget deficit target to 5.5%-5.7% of gross domestic product from a prior 6.8% due to higher than expected tax revenues, reflecting a rapid economic recovery from the crisis. It projects a 3.9% deficit in 2022.

Israel’s economy is projected to grow 7% in 2021 after a 2.2% contraction in 2020.

The budget, along with an accompanying bill filled with economic reforms, has presented an early test for the cross-partisan coalition government of Naftali Bennett, who took over in June.

Two years of political stalemate and four elections had left Israel still using a pro-rated version of the 2019 state budget passed in March 2018. Squabbling within Netanyahu’s coalition cabinet last year over a two-year budget for 2020 and 2021 helped bring down his government.

Bennett, who has a razor-thin majority in the Knesset, has been lobbying his coalition partners to avoid conflict and controversial issues that could cause friction until after the budget is approved in the Knesset.

Along with Finance Minister Avigdor Liberman, Bennett had come under pressure from ministers and lawmakers upset at some planned reforms, while others sought higher funding.

The budget has earmarked NIS 609.1 billion ($191.2 billion) in 2021 spending and NIS 572.9 billion ($179.8 billion) in 2022 – including debt servicing and funds to fight the coronavirus pandemic.