Bank of Israel’s budget to grow by 14% in 2012

The Knesset Finance Committee voted to express full support for the central bank’s 2012 budget.

December 19, 2011 22:36
2 minute read.
Stanley Fischer at press conference in Jerusalem

Stanley Fischer at press conference in Jerusalem_311. (photo credit: Reuters)

Despite warnings of an economic slowdown, the Bank of Israel’s budget will grow by 14 percent next year, mainly because of a temporary spike in employee retirements under a new workplace agreement.

The Knesset Finance Committee voted to express full support for the central bank’s 2012 budget, which was released Monday. The budget will increase to NIS 798.2 million next year, NIS 94.5m. more than in 2011.

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Bank of Israel Governor Stanley Fischer told the committee the extra funding would help the bank meet workplace agreements and fund external steps such as the appointment of a new economic adviser to the government.

An extra NIS 49m. will go toward the retirement packages, although the higher number of retirees paves the way for a new generation of young professionals who will start on a lower wage, the bank said in its 2011 budget report. An extra NIS 20.6m. will be allocated for investments to support projects in the fields of logistics and technology.

Finance Committee chairman Moshe Gafni (United Torah Judaism) said the Bank of Israel was one of the best central banks in the world. It was no mistake that Fischer was considered a front-runner for the position of International Monetary Fund managing director earlier this year, he said.

Fischer, 67, was ruled ineligible because of his age.

“I personally would have looked past these technical limitations and appointed him to the [IMF] position, but as an Israeli I am happy that he stayed here,” Gafni said. “The Bank of Israel is a unique body, and we want to strengthen its status.”

Committee members Uri Ariel (National Union) and Zevulun Orlev (Habayit Hayehudi) both called on the bank to reconsider its budget, especially since other government offices and public bodies are reducing expenditures.

“The bank is constantly preaching about not breaking the budgetary framework, but in practice the bank itself is increasing its own budget substantially,” Orlev said. Turning to bank officials present at the committee hearing, he added: “Imagine that the government took your lead [and raised its own budget]. It would probably receive a barrage of criticism, and you should take that into consideration.”

Meanwhile, IBI investment released its 2012 preview on Monday and said it expects the central bank to pursue more aggressive monetary policy next year in an attempt to protect the country from the effects of the growing crisis in Europe.

Fischer has shown a tendency to react aggressively when he smells oncoming recession, IBI chief economist Rafi Gozlan told reporters in Tel Aviv. He predicted that the real interest rate could fall into negative territory if the crisis in Europe is worse than anticipated.

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