Bar-On wants lower budget commitments

The Bank of Israel warned that recent government decisions to increase education and welfare spending demand a change in fiscal policy.

Ronnie Bar On 88 224 (photo credit: Ariel Jerozolimski)
Ronnie Bar On 88 224
(photo credit: Ariel Jerozolimski)
The government is facing high expenditures and needs to make significant downward adjustments to spending commitments in the state budget of 2008 and 2009, Finance Minister Ronnie Bar-On told the cabinet Tuesday. "The surplus in budgetary spending commitments for 2009 is very significant," he said. "We are expecting a very difficult and complex process in setting national priorities, including the cancellation of parts of the additional spending commitments, which the government has decided upon in the present and past, as well as the postponement of future government spending plans." Already in 2008, the government was struggling with a bulk of spending commitments lacking budgetary funding, and adjustments, including spending cuts, will need to be instated in the current state budget, Bar-On said. "We have not yet determined the size of the cuts needed to meet the fiscal targets set for the 2009 budget," he said. Bar-On did not present the government with plans to cut the 2009 state budget by NIS 6 billion and introduce tax cuts as was reported in the Hebrew press on Tuesday. In an effort to give ministers and the Knesset more time to discuss the upcoming budget and the clauses of the Arrangements Law by voting time in December, the Finance Ministry announced changes to the timetable for the 2009 budget. The Treasury intends to provide ministers with the 2009 draft budget at the end of June, earlier than in previous years. Bar-On said the Knesset will be more engaged in the budget-making process. The Bank of Israel warned in January that recent government decisions to increase education and welfare spending demand a change in fiscal policy targets if the country wants to meet international standards. According to the central bank, the government decisions taken will have budgetary implications by increasing the growth of public expenditure at a rate of between 2.5 percent and 3% a year until 2010 against the 1.7% real expenditure growth ceiling. The bank warned that if the government does not cut expenditures in other areas, it will need to adjust its fiscal targets. Meanwhile, the government on Tuesday announced plans for the possible adoption of a new economic program entitled "Israel 2028 - Socioeconomic Vision and Strategy in a Global World." The goal is to formulate a national strategy for placing Israel among the 15 leading countries around the world in terms of per capita income over the next 20 years. The new economic plan, which is being headed by Eli Hurvitz and David Brodet, is expected to be presented to the government next Sunday.