Acting Finance Minister Ehud Olmert presented the 2006 budget to the Knesset on Monday, promising to keep within the framework set by predecessor Binyamin Netanyahu but saying he would make some changes in accordance with his intentions to alleviate poverty.
Olmert committed to maintaining the budget deficit at 3% of gross domestic product - expected at around NIS 575b. in 2006 - and to not increase government spending in the years 2005-2010 by more than 1% in real terms. However, due to the disengagement program, the Treasury is allowing for a 0.4% rise in the deficit and another 1% increase in spending for 2005-2006.
The budget initially was presented by Binyamin Netanyahu and was passed by the cabinet in August, just a few days after he resigned as finance minister. Olmert intends to make changes to give priority to fighting poverty, though he denied that any alterations would be based on "election economics."
"We will create a programâ€¦to cut the gaps (in society), which have reached intolerable levels. There is no connection between this and the elections," he said.
In early September, Olmert charged Treasury Director-General Yossi Bachar with creating a plan to combat poverty. As yet, the government has made no decisions on the changes it will make in the budget for this purpose but Bachar, who is working with representatives from other government ministries and the Bank of Israel, will present his proposals in the middle of November.
Olmert indicated that one ministerial budget that would be difficult to cut substantially would be the defense budget, despite the success of the disengagement program and the withdrawal of troops from Gaza.
"Considering the circumstances since disengagement, it's too early to suggest that there can be a major change in expenses. There is still terror coming from Gaza that needs to be dealt with by the security forces and this costs money."
Nevertheless, the government is cutting defense spending in 2006 by 1.1% to NIS 46.1b., although it is raising civilian spending by 3.9% to NIS 47.9b. In total, the budget will rise by 1.1% from 2005 to a gross NIS 284.2b. The government expects income of NIS 198.7b., of which NIS 168b. will come from taxes and NIS 30.7b. from other sources.