Israeli Government Approves State Budget for First Time in Three Years

Due to two years of political stalemate and four elections, Israel is using a pro-rated version of a state budget passed in 2018 ■ Health Ministry to get extra 2 billion shekels

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Foreign Minister Yair Lapid (L) and Prime Minister Naftali Bennett (C) at Monday's government meeting
Foreign Minister Yair Lapid (L) and Prime Minister Naftali Bennett (C) at Monday's government meetingCredit: Emil Salman

Israel's government advanced the 2021-2022 state budget on Monday following a long night of talks, more than three years after the government last approved a fiscal spending package.

The Knesset – in which Prime Minister Naftali Bennett has a razor-thin majority – is expected to take its initial vote in early September with final approval for the 14-month budget slated for early November. It must still approve the two-year spending plan by November to avoid dissolving the government and new elections.

After discussions which stretched late into the night, the treasury agreed to allocate an extra 2 billion shekels ($618 million) to the Health Ministry's budget, in addition to its base budget of 43 billion shekels ($13.3 million). The government has also agreed to increase the Defense Ministry budget for 2021-2022 by 13.5 billion shekels ($4.17 billion), bringing the total to around 62 billion shekels ($19 billion).

“Israel is returning to work,” Bennett said after an all-night session. He said the 2021-2022 spending plan “reflects concern for all citizens of Israel and does not serve any narrow sectorial interest.”

Israeli media have reported that ministers are seeking 14 billion shekels ($4.3 billion) of further spending.

"Everyone is justified but there is not enough money for everyone. It's impossible to please everyone," Finance Minister Avigdor Lieberman said.

Total fiscal spending, including extra funds to cope with the coronavirus pandemic and debt servicing, is expected at 605.9 billion shekels in 2021 and 560 billion shekels in 2022.

The budget deficit is projected at 6.8% of gross domestic product in 2021 and 3.9% in 2022, after hitting 11.6% in 2020.

Bennett told ministers the budget serves all Israelis and not the interests of any specific sector – a reference to ultra-Orthodox parties not being a part of the current coalition – and aims to reduce bureaucracy and boost competition in a bid to lower living costs.

He said without the current coalition, Israel would be in the midst of a fifth election campaign. "Today we bring the budget and prove that this is a government that deals with the public and not itself," he said.

Lieberman has come under fire by farmers for a planned reform of the agriculture sector – long protected by the government. Citing a doubling of fresh produce costs over the past decade, the Finance Ministry seeks more imports and insists that as part of the proposed plan, farmers will benefit from direct subsidies for agricultural supplies such as fertilizer and pesticides, as well as state investments in research and innovation.

"It's impossible to protect them and do nothing," Lieberman said.

Due to two years of political stalemate and four elections, Israel is using a pro-rated version of the 2019 state budget that was passed in March 2018.

A failure to agree on a budget was one of the factors that led to the collapse of the previous government, led by Likud's Benjamin Netanyahu. That resulted in new elections early this year that ultimately put Bennett in charge of an eight-party coalition spanning the political spectrum.

The Cabinet's approval of the spending plan is another step toward avoiding new elections, though it is no guarantee.

Reuters contributed to this report.

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