Finance and Defense Ministries Ink IDF Budget, Reform

Many hail agreement as end to years of feuding, but Prime Minister's Office wants two clauses re-examined.

Finance Minister Moshe Kahlon and Defense Minister Moshe Ya'alon shaking hands, November 18, 2015.
Olivier Fitoussi

The agreement setting out the size of the defense budget over the coming years, as well as reform in pay and pensions for career soldiers and great treasury oversight over spending, was signed Wednesday after hours of talks to wind up the pact.

The pact was hailed by many as marking the end of years of annual feuding between the finance and defense ministries over the budget and reforms.

“The agreement between the treasury and the defense establishment is unprecedented and extraordinary. It’s the first time in which the treasury budget division and the Defense Ministry signed a multi-year agreement in direct negotiations,” said one defense source, who asked not to be identified.

“We reached an agreed solution without mediators. No one can say that the treasury has control over defense or defense has control over the treasury,” he said.

Nevertheless, the agreement has its opponents. Finance Minister Moshe Kahlon, who supports the pact, ordered rebellious officials in his ministry to get behind the agreement. Prime Minister Benjamin Netanyahu’s office also has reservations concerning two key provisions that it wants reviewed before it is finally approved.

Under the agreement, the baseline defense budget is set at 56 billion shekels ($14.4 billion) starting in 2016, and 57 billion the year after. On top of that, the army will get supplementary appropriations up to 3 billion shekels annually in exchange for undertaking reforms, and another 2.7 billion for rising costs and efficiency steps.

Treasury officials expressed satisfaction about the baseline figure, which will from now on serve as the starting point for any supplement, and replace the confusion that had characterized previous years. They will also get full access to figures on military spending for the first time, although not control over them.

As a result the treasury is now expected to support the army’s multiyear Gideon program for restructuring the army. In the past the treasury has blocked such programs, accusing the defense establishment of waste and inefficiency.

The Prime Minister Office, however, is concerned about two aspects of the pension-and-pay part of the agreement. Netanyahu himself is concerned about overly generous severance pay terms for career officers, as well as a 2013 pay raise they received in exchange for their pension age being raised.