Israel State Budget Triples To $26 Billion


The budget of the State of Israel for the year 2020 will triple its 2019 mark, reaching NIS 87.5 billion ($26 billion.) According to Reuters, the deficit could reach as high as 14.5% of Israel’s gross domestic product.

Israel’s Finance Ministry fears that a slow economic recovery will mean an 11.7% deficit in 2021 and 8.3% in 2022. Israel’s deficit last year was 3.7% of GDP.

The Finance Ministry also reported that Israel’s deficit P for the 12 months ending August 31, 2020, is 8.1% of GDP, up from 7.2% at the end of July, 6.4% at the end of June and 6% at the end of May. The deficit was only 4% at the end of March and 3.1% at the end of February, before the Covid-19 shutdown began.

Every country in the world is suffering financially due to the Corona Virus crisis. Countless people were temporarily laid off from work and many lost their jobs permanently. The loss of work means drop in consumption and economic contraction. Less buying means lower revenue from sales and value added taxes.

At the same time, governments have been forced to pay out a great deal in unemployment benefits. And people out of work means less money brought in from income taxes and payroll taxes.

Ynet reports that Israel’s VAT revenue fell from NIS 8.5 billion, August 2019 to only NIS 6.8 billion in August 2019. In August alone, the country spent NIS 17.3 billion more than it took in.

Put this all together, lower revenue and higher expenditures, and you get higher budget deficits.

Countries like Israel which depend on tourism for a large share of their GNP have been especially hard hit since tourism dried up.

Just last week Shaul Meridor resigned from his job as head of the State Budget Division in the Ministry of Finance. He did so claiming that Israel’s government has mishandled the current economic crisis.
Shaul Meridor said at the time, “The decision making process is influenced by narrow non-essential interests… silencing the professional ranks.” Meridor added that there is a, “blatant disregard for administrative work.”

Israel’s government has been going through a coalition crisis in recent weeks over budget disagreements. Deadlines were pushed back after the coalition partners could not agree to a deal and threats were made to call for new elections. Under Israeli law, if a budget is not passed by the Knesset then the government falls and a new one must be formed or new elections held.

Globes reports that during August Israel’s government added NIS 14 billion into its economy in various aid programs and since the start of the crisis NIS 34.5 billion has been injected, well below the government target of NIS 49 billion by the end of August.

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