Ten Months Before It Goes Into Effect, Knesset Approves 2019 Budget

Lawmakers pass spending package quickly after coalition crisis of Haredi draft is resolved

Moshe Kahlon and Benjamin Netanyahu during a Likud party meeting at the Knesset. October 15, 2012.
REUTERS/Baz Ratner

Nearly 10 months before it is to take effect, the 2019 budget was approved by the Knesset late on Wednesday.

Lawmakers backed the 479.6 billion shekel ($140 billion) spending package by a vote of 62 to 54 after a marathon 24-hour debate and five hours of voting where all of the opposition’s reservations on the bill were rejected.

The vote was an uneventful denouement after the coalition’s ultra-Orthodox parties held the budget hostage for nearly two weeks while they demanded a law on army conscription be voted on first. The crisis was resolved on Tuesday, letting the budget vote move ahead just before the Knesset was due to break for its spring recess.

In a victory statement, Finance Minister Moshe Kahlon, who had threatened to quit the government if the budget didn’t pass by deadline, said any delay in passing the budget would have hurt needlessly ordinary Israelis.

“When I heard about two weeks ago that Israel’s budget was being turned into a tool for political extortion, I responded immediately that it can’t happen. I repeat, I didn’t say that for my own sake. I insisted that the budget had to pass because those who harm the budget harm the country,” he said.

In fact, passage of the budget so far in advance was more about politics than economics. Prime Minister Benjamin Netanyahu has been countering on having the legislation out of the way so it would not be a cause of rifts in the coalition that could bring down the government before the next scheduled elections in November 2019.

Economists, on the other hand, have been mostly critical of the early budget, saying it won’t let the treasury respond fiscally to any change in economic conditions.

Moshe Gafni (United Torah Judaism), the Haredi lawmaker who chairs the Knesset Finance Committee and delayed the budget debate, acknowledged the problems with the timing of the budget vote but maintained that political calculations were more important.

“Moving the timing for the 2019 budget forward was a difficult decision because it’s hard to predict the targeted budget deficit, hard to predict the rate of economic growth, but the advantages of it that in the end made it worthwhile to move the budget forward and approve it now,” he said.

However, the widening police investigations and a decision by Attorney General Avichai Mendelblit expected sometime this year about indicting the prime minister means the threat to the government remains very real.

The 2019 budget increases spending by nearly 20 billion shekels, or 4.3%, from 2018 and includes 100 billion shekels of debt repayment and 39 billion for interest expenses, the Finance Ministry said. The budget allocates 63 billion shekels for defense spending.

The budget and accompanying Economic Arrangements Law, include a package of reform measures, such as removing barriers to personal imports, making it easier for account holders switch banks and subsidies for after-school programs.

It also sets the deficit target at a relatively high 2.9% of gross domestic product. In recent years, the deficit has come in under target, thanks to unexpectedly high tax revenues. But a day earlier the International Monetary Fund criticized the 2019 target as too high at a time when the economy is growing strongly.