Finance Ministry: the budget pit is expected to double in 2020 to NIS 17.4 billion

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by Ifi Reporter Category:Financial Jan 12, 2019

The budget pit, which will reach NIS 8 billion this year, is expected to double in 2020 to NIS 17.4 billion. The Finance Ministry updated cabinet ministers on the alarming figures ahead of Sunday's cabinet meeting to discuss the severe budget deviation and steps to reduce it. The government will be asked to authorize the Treasury to take the first immediate step to deal with the huge deficit expected in 2019.
Ministry of Finance officials propose using a pre-determined reserve of NIS 1.5 billion to reduce the deficit. The reserve will enable the reduction of the hole, which currently stands at NIS 9.8 billion, to only NIS 8.3 billion. The hole was made up of NIS 6.5 billion in revenue compared to the forecast when the budget was approved a year and a half ago and NIS 3.3 billion in government spending. The deficit target set at the time of the approval of the budget for 2019 is 2.9% of GDP, but according to the update from last week, the deficit will reach 3.5%.
Even after taking advantage of the reserves, 2019 is still expected to end with a deficit of NIS 50 billion.
In addition, the Ministry of Finance is requesting the approval of the Government for an updated budgetary framework plan prepared for the years 2020-2022, on the grounds that the original plan, approved in June 2018 together with the 2019 budget, is no longer relevant.
In an opinion attached to the draft resolution, Finance Ministry legal advisor Asi Messing explained that while the last legal date for updating the plan is in June, however, in view of the fact that the forecast update forecasts a "real deviation" in the budget framework, it is his duty to ask for the update now and not to wait for June.
The government's updated analysis shows that in the next three years, government expenditure will increase by an average of NIS 17.6 billion annually, while the current plan is for an increase of NIS 12.4 billion. Among other things, the salary supplement for police officers, prison guards and pensioners has been added since the last update, which increases the expenditure of the Ministry of Internal Security budget by about NIS 1 billion a year. In addition, the expenditure on financing transportation projects will increase by NIS 1.5 billion annually.
The Ministry of Finance explains that the increase in expenses is not an exception to the budget of existing projects, but rather the advancement of future transportation projects, inter alia, in the area of ​​heavy railways, light railways and the planned metro in the Dan region. The subsidy for bus companies is also expected to increase beyond the original plan due to the diesel fuel arrangement. In the area of ​​local government, the Ministry of Finance notes that the capital grant to the Jerusalem Municipality is being increased as a major source of an expected NIS 200 million in local government funding.

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