Israel Starts Work on 2021 Budget, Day After Central Bank Warning

Israeli Finance Minister Israel Katz said Thursday that he’s instructed budget officials to begin work on next year’s budget, a day after the central bank called on the government to approve a spending plan.

Israel has been operating without a 2020 budget because of the political turmoil that’s gripped it, and officials have said work isn’t being done on next year’s spending plan, either, amid expectations the government will fall. Working without a plan in 2021 would be even more problematic, and could result in the under-funding of growth-generating programs at a time when the coronavirus has battered the economy, Bank of Israel Governor Amir Yaron warned.

It could also reflect badly on the country in the eyes of the international bodies that follow the economy, he said.

“During this period of shocks to the economy and society in Israel and the world, there is great importance to how things look, and the markets assign great importance to the way in which governments and countries operate under the shadow of the crisis,” Yaron said at a cabinet meeting late Wednesday, according to a central bank statement.

Political analysts have speculated that the government hasn’t passed a 2020 budget because Prime Minister Benjamin Netanyahu plans to go to elections rather than allow Defense Minister Benny Gantz take over as premier in November 2021 as per their power-sharing agreement. Failure to pass a spending plan could hand him that opportunity because parliament is automatically dissolved if no budget is approved by a Dec. 23 deadline.

The Bank of Israel expects the economy to contract by 4.5% to 7% this year, depending on the severity of the outbreak. Israel has the world’s highest per capita coronavirus morbidity rate, Israeli media reported last week.

©2020 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.