On Monday, February 19, the government is expected to implement across-the-board cuts to all state budget items due to delays in presenting the 2024 budget to the Knesset, mainly stemming from military expenditures, with parliament needing about another month to approve the draft.
As per a report from the government in December, there's an anticipated reduction of around 67 billion shekels, as reported by Davar1. However, if the Knesset swiftly passes a supplementary budget with an expansion of approximately 70 billion shekels and cuts of 10.5 billion shekels, the impact of the cuts will likely be minimal.
The necessity for these cuts stems from an amendment to the Basic Law on the State Economy, enacted about a year ago in response to a High Court decision overturning the two-year principle for forming the state budget.
The High Court ruled that using temporary regulations ("oraot shaa") to bypass the mandatory adoption of the budget for one year, as per the Basic Law, was a harmful practice. Consequently, the time frame for passing the draft budget in the Knesset was limited to two consecutive years, ensuring the budget was approved six months before it took effect. This was enacted in May 2023 for the 2024 budget.
The new mechanism for budget cuts aims to maintain a reserve to address discrepancies between spending additions and reductions that arise before the budget takes effect. However, the budget reserve for 2024, totaling 2 billion shekels, is vastly inadequate compared to the nearly 70 billion shekels in budget changes. Additionally, the Ministry of Finance has failed to adjust forecasts since the war's outset, violating the Basic Law.
