A month after Prime Minister Benjamin Netanyahu unveiled a plan on March 30 to spend 80 billion shekels ($22.6 billion) to help fight the economic impact of the coronavirus pandemic, the Finance Ministry had disbursed just 26% of the funds.
Figures from the accountant general show only 20.8 billion shekels of the money had been disbursed by April 30 – 16.1 billion of that in cash and another 4.7 billion in firm commitments to spend it. In fact, the spending is even smaller because other amounts were subsequently added to the package.
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Even with most of the original allocation still not disbursed, the treasury announced at the end of last week that it was increasing the spending to 100 billion shekels.
The expanded program includes the establishment of a 4 billion shekel fund to lend money with limited guarantees to businesses at high risk due to the coronavirus lockdown, such as restaurants and hotels, which have had a difficult time getting credit. It also includes 6 billion shekels to business to encourage employment, money that had been allocated in the original 80 billion program.
When the original 80 billion program was announced by Netanyahu and Finance Minister Moshe Kahlon they stressed the major commitment the government was making to keep the Israeli economy afloat as businesses were paralyzed by increasingly severe lockdown measures. “It will enable businesses to survive at least for two or three months. This gives us critical time,” an official who asked not to be named at the time told TheMarker.
Governments around the world have undertaken similar measures as economists warned it would be critical to ensure that consumers had spending money and that businesses didn’t go bankrupt, which would slow, or even scuttle, a post-pandemic recovery.
Economists have warned that speed in getting the money into the hands of businesses and consumers was critical. “Even a good solution will be bad if it isn’t done quickly,” David Boaz, a former treasury wages director, told Knesset members in April.
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Part of the money – about 2.3 billion shekels – originally allocated for encouraging employment ended up being spent on a program announced two days afterwards to pay a Passover holiday grant to parents on young children, the elderly, the disables and other groups.
That granted was implemented in full and came in only 2% over-budget, but other elements of the program, such as unemployment benefits and various grants amounting billions of shekels that were supposed to be disbursed in April, will or have been paid only this months
Another program, 6 billion shekels promised as loans to big businesses, only began accepting applications last week. The delays have elicited strong criticism from businesses for the long time it took for the government to make a commitment and to allocate the aid.
Of the money that was designated for the health care system – 11 billion shekels in the original program, increased to 13.5 billion in the expanded version – just 1.2 billion had been actually spent. Another 3.3 billion is contractually committed but hasn’t yet been spent, according to the accountant general.
Another 5 billion shekels designated for “acceleration and development of the economy” (mainly infrastructure development) has not been spent at all. Contracts worth some 630 million shekels have been signed, but no money disbursed as of the end of April.
Other programs have had relatively higher rates of disbursement – for instance, one that awards businesses discounts on local taxes (arnona) to be covered by central government subsidies to local authorities. Of 2.6 billion shekels that had been allocated, 69% had already been disbursed by the end of April and the rest by the end of July.
In addition, a loan program for small and medium-sized businesses has been almost completely allocated: Of 8 billion in the original program, 7.2 billion had been disbursed. Under the expanded program, the program will be enlarged to 14 billion.
However, of the 3.8 billion shekels in grants allocated to the self-employed, only 20% had been disbursed in April – although in recent days that percentage should have risen considerably with the payment of the second installment of the program in the last several days.
Another program, worth 5.2 billion shekels, to help businesses cover their fixed costs hasn’t been disbursed at all, nor has the 700 million allocated to help them meet Health Ministry coronavirus directives. Some 200 million shekels each for professional retraining and for the no-profit sector haven’t been disbursed at all, either.
In spite of the slow pace of coronavirus aid disbursement, the government’s budget deficit swelled to 4.8% of gross domestic product in the 12 months through April according to the accountant general. That compares with 4% in March and 3.1% in February.
The deficit was the highest since the global recession, when it reached 5.15% of GDP in 2009. But the rate will balloon over the course of 2020 to more than 11%, or at least 150 billion shekels.
In April alone, overspending grew to 14.9 billion shekels, compared with 4.9 billion a year earlier.
Because of the pandemic’s effect on business activity, tax revenues this year are expected to be 20% lower than the treasury originally forecast – between 290 billion and 295 billion shekels, versus the 361 billion forecast last December.