Cost of war hits NIS 7 billion mark

Hirchson: NIS 2.2b to be transferred from sections of budget to fund war.

hirchson 88 298 (photo credit: Ariel Jerozolimski)
hirchson 88 298
(photo credit: Ariel Jerozolimski)
Finance Minister Avraham Hirchson announced Wednesday night that NIS 2.2 billion would be transferred from various sections of the 2006 budget to fund the fighting in the North. "At this stage, at the height of the fighting, all government ministries are required to demonstrate national responsibility and carry the burden of funding the fighting. Fighting is not funded ex nihilo," he said, adding that changed priorities require changes in the budget. While NIS 1b. would be taken from different agreements and projects budgeted for 2006 but only scheduled to be used in 2007, NIS 1.2b. would be taken as a direct cut from this year's government ministry budgets. The Health Ministry, Welfare Ministry and local authorities would be spared cuts to their budgets, but the Education Ministry would be among those losing some of their funding for the rest of the year, Hirchson said. Additionally, fully one half of the ministries' cuts - NIS 600 million - would be taken from other parts of the Defense Ministry's budget itself. "There are some places that we can take from [within the defense budget] and other places where we must give more, because of the war," said Budget Supervisor Kobi Haber. Hirchson said he would present the transfer for cabinet approval Sunday, and that Prime Minister Ehud Olmert had already approved the measure Tuesday. Beyond the NIS 2.2b. to be made available as soon as the measure receives cabinet approval, another NIS 600 million within the ministries' 2006 budgets would be earmarked as a reserve for possible future use to fund expenses of the fighting "in the event that they will be needed," Haber said, adding that the full NIS 1.8b. represents 9 percent of the year's budget. Although the full costs of the fighting are not yet known, in the defense sector it is estimated that the conflict has cost Israel NIS 7b. so far, Hirchson said. Additionally, "hundreds of millions of shekels" have been spent on immediate needs in the North. Hirchson and his staff stressed that the 2006 budget framework would not be exceeded. "This is to send a message to the markets that we are consistent and maintain our policy. This is very important. We do not break our budget framework," said Finance Ministry Director-General Yossi Bachar. "The war which was forced on us has an economic cost. This cost cannot come at the expense of financial stability," Hirchson said, adding that "a 'zigzag' in economic policy would hurt... the Israeli economy's reliability and have a negative effect on the economy's growth." "The more strictly we maintain a cautious and responsible economic policy, the more strictly we [maintain] fiscal restraint and ensure that the allocation of finances is not done loosely, and the more strictly we stick to the principles that brought the Israeli economy to flourish, the more we'll be able to assist the development of the North, and the faster and easier the economy's return from a state of fighting to routine will be," he said. "As of today, there is no intention in the Finance Ministry to raise taxes or charges," Hirchson stressed.