The government budget deficit for the first quarter ballooned to NIS 4.6 billion, nearly triple its level the year before, according to figures released on Monday by the Finance Ministry.
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The shortfall, amounting to NIS 2.9 billion in March alone, was mainly a result of disappointing tax revenues, the treasury said. They reached NIS 57.5 billion for the three-month period, down NIS 1.8 billion in real terms from the first quarter of 2012.
The government’s difficult finances add to the headaches of Finance Minister Yair Lapid as he begins work on the 2013 budget that was never approved by the Knesset. He has already warned Israelis that they face a year of austerity and that his plans for instituting middle-class-friendly reforms may have to wait.
The rate of tax collections in the quarter worked out to NIS 230 billion in annual terms, much less than the target set last summer for this year of NIS 241 billion. It is also significantly less than the more modest target that was contained in the revised budget, which lowered forecasted revenues to between NIS 233 billion and NIS 237 billion.
The wider first-quarter deficit brought the cumulative overspending by the government in the 12 months to March 31 to NIS 42 billion, or 4.5% of gross domestic product, the Finance Ministry said. That was the same level for the 12-months through February and January, but is bigger than the 4.2% deficit for 2012 and is 50% higher than the government’s 3% target for 2013.
With a 2013 budget, the government has been operating since the beginning of the year along the parameters of the 2012 budget, each month’s spending 1/12th of last year’s allocations.
In that context, the treasury said that total government spending in March, not including repayment of debt principal, was NIS 27.4 billion, including NIS 9 billion on interest charges. The NIS 18.4 billion spent on government operations in the month was unchanged from February but higher than in January, a month typified by low government spending.
During the first quarter, spending on government operations reached NIS 51.7 billion, up 1.3% from the year before, the ministry said. While civilian spending was up 3.8%, defense spending dropped by 5.6%.
The shortfall in revenues last quarter was particularly acute for direct taxes, mainly income tax, which fell 8.8% in real terms to NIS 27.6 billion from a nominal NIS 29.8 billion in the first quarter of 2012, the treasury said. Collections of indirect taxes, on the other hand, rose 6.1% in real terms from the year before, it said. But that increase reflected last summer’s one percentage point increase in value-added tax to 17% and tax hikes on cigarettes and alcoholic beverages.