Budget approved, yet challenges linger: financial commission to review deficit

On Wednesday, March 13, following a three-week delay, the ruling coalition approved a revised version of the state budget for 2024, considering the economic impact of the war and thus lifting the technical sequestration imposed at the end of February.

However, next week, the Knesset Finance Committee will urgently address the issue of the state budget deficit. The amendment accompanying the state budget sets the deficit ceiling for 2024 at 6.6% of GDP, yet the deficit currently stands at 5.6%, with estimates suggesting it could reach 7-8% by the end of the year.

Furthermore, despite budget approval, a dispute persists over the allocation of 590 million shekels. According to the coalition agreement with the Yahadut HaTorah bloc, these funds should be transferred to private networks of ultra-Orthodox schools to support the Ofek Hadash reform.

However, the ministries of finance, education, and justice oppose this, insisting that the money be paid directly to teachers, as in public schools, and demanding tighter financial audits and performance evaluations from private networks.

This disagreement was a key factor in the three-week budget approval delay. Eventually, when it became clear that further delay was untenable, Moshe Gafni (Yahadut HaTorah), the chairman of the financial commission, ceased blocking the vote.

However, additional measures accompanying the budget aimed at reducing the deficit from 2024 to 2027, totaling 6.6 billion shekels, remain in limbo.

Specifically, the financial commission is deadlocked over proposals such as abolishing tax exemptions for cigarette purchases in Duty-Free stores, implementing a carbon tax, raising car licensing fees, and requiring mandatory reporting for apartment rentals.

It's worth noting that in Moody's report announcing a downgrade of Israel's credit rating while maintaining a negative outlook, analysts praised these accompanying measures but expressed doubts about the government's ability to implement them given the current political climate.