When moving forward with legislation toward establishing a natural gas revenue fund, Knesset members must ensure that the government's ability to take a loan from such a fund is not too easy, MK Moshe Gafni (United Torah Judaism) warned on Wednesday.
In April, Energy and Water Ministry Silvan Shalom announced the government's intention to create a natural gas profit fund for the public revenues generated from the resource based on the Norwegian model – in which the fund's money is largely invested in foreign markets. Members of the Knesset's Science and Technology Committee on Wednesday discussed the bill toward establishing such a fund, specifically debating the procedure that the state must follow in order to take a loan from the fund, as described by the bill.
According to the text of the bill in its current form, the state would be able to take a loan from the fund – subject to the approval of 65 Knesset members – if a large-scale socioeconomic crisis occurred. Loan repayment would be quite easy and available in a variety of ways, allowing for changes in interest rates or exemptions, members of the Science and Technology Committee said. As the chair of that committee, MK Moshe Gafni (United Torah Judaism) stressed that such a situation could cause Israel to become prey to the dreaded "Dutch Disease."
The Dutch Disease phenomenon characterizes a situation in which a large, unexpected increase in revenues from resources causes a sharp appreciation in the exchange rate and thereby prompts a decrease in the production and competitiveness of the tradable sector.
Because the bill requires the approval of only 65 Knesset members in order for the state to receive a loan, the legislation not only puts the country at risk of acquiring the Dutch Disease but also simultaneously "empties the fund's coiffeurs," Gafni argued.
"In practice, according to the bill, here in effect a parallel channel to the state's regular budget is being opened," Gafni said. "This would allow the government to reduce the budgets of its ministries under the assumption that it will be possible to receive the required sum from the fund's money."
In order to prevent such a situation, Gafni proposed that the approval of the budget for the fund occur only two months after the state's regular budget has been approved.
Any government decision regarding the gas profit fund should receive the approval from a joint Knesset committee with representation from the Finance, Science and Technology, Education and Labor and Welfare committees, Gafni added.