Written by Stephen Scheer
JERUSALEM (Reuters) – Israel's central bank governor on Sunday called on the government to rein in non-defense spending and implement responsible fiscal policy to offset further expansion of the military budget.
As the Gaza conflict nears six months, lawmakers this month approved a revised 2024 state budget that adds tens of billions of shekels to Israel's war against the Islamist Palestinian organization Hamas in the Gaza Strip.
Bank of Israel Governor Amir Yaron said a committee with the participation of the defense and private sectors should be established soon to set the size of the defense budget based on information.
In a letter to ministers and members of parliament in the central bank's 2023 annual report, he said: „Israel's defense needs for the coming years are clear and an appropriate multi-year budget plan takes into account all economic implications. should be formulated.“ report.
„When increasing the budget beyond what has already been decided, it is important to at least include fiscal adjustments to prevent a permanent increase in the public debt-to-GDP ratio.''
Israel will now spend about 20 billion shekels ($5.4 billion) more annually on defense.
The revised budget also authorizes compensation payments to households and businesses affected by the war that began with Hamas's blitzkrieg attack on Israel on October 7.
The fiscal deficit for 2024 is set at 6.6% of gross domestic product (GDP), revised from the prewar level of 2.25%. February's deficit rose over the past 12 months to 5.6% from January's 4.8%.
Yaron said the Israeli economy faces significant challenges, particularly low labor productivity and weak basic skills that hinder the integration of ultra-Orthodox Jewish men and Arab women into the labor market. Ta.
Israel's economy will grow by 2% in 2023, with per capita GDP reaching zero. The governor said the Israeli economy entered the war with good economic fundamentals and had recovered quickly from crises in the past.
„Implementing responsible economic policies that address current challenges while addressing fundamental challenges to the economy and promoting growth engines will help achieve sustainable growth,“ Yaron said. Stated.
(1 dollar = 3.6831 shekels)