Israel Budget Planning at Impasse With Government Split
Israel Budget Planning at Impasse With Government Split
(Bloomberg) -- The drafting of Israel’s 2020 budget is on hold, according to people familiar with the matter, even as disputes over the spending plan threaten to bring the government down.
Work has been suspended, they said, as politicians bicker over whether to draft a one-year plan or stick to the two-year format outlined in the coalition agreement underpinning the government. In the meantime, Finance Ministry bureaucrats are holding preliminary discussions on a possible two-year budget, they said, even though Finance Minister Israel Katz has maintained only a 2020 plan is in the works.
They spoke on condition of anonymity to discuss confidential matters.
Defense Minister Benny Gantz is holding fast to a two-year plan while Prime Minister Benjamin Netanyahu is angling for a shorter time frame. Speculation has mounted that Netanyahu might provoke a budget crisis to create an opportunity to wriggle out of his agreement to hand Gantz the premiership in November 2021.
By law, parliament dissolves and new elections are called if budgets aren’t passed by a stipulated date. The deadline for the 2020 budget is approaching next month.
“The argument is, are we going to let Benny Gantz be prime minister or not,” said Guy Beit-Or, head of macro research at Psagot Investment House. “The budget is just a tool.”
All this wrangling is taking place as the economic fallout from the coronavirus deepens. A Ministry of Finance spokesperson said the quarrel is between Netanyahu and Gantz, and referred a request for comment to politicians.
As Israel’s coronavirus cases surge, there is rising concern over some of the country’s spending amid projections its budget deficit could climb as high as 15% of output this year. Israel has so far unveiled roughly 190 million billion shekels ($55.5 billion) in fiscal aid to deal with the pandemic and officials are discussing an additional 15 billion shekels or so for the health and education systems, the people familiar said.
But Karen Vartapetov, a director for sovereign ratings in Frankfurt with S&P Global Ratings, said the credit assessor was looking beyond that headline figure.
“Even if they build up their debt this year and next, this alone might not put pressure on the credit profile if there is better visibility on the mid-term fiscal consolidation and if other credit factors remain strong,” Vartapetov said in an interview. “For advanced sovereigns like Israel, I think what’s happening this year is that monetary stimulus will buy governments time.”
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