Israel to return to annual budgets after 2014

Reuters News
Posted: Apr 07, 2013 6:15 AM
Israel to return to annual budgets after 2014

TEL AVIV (Reuters) - Israeli Finance Minister Yair Lapid decided on Sunday to revert to annual budgets after 2014, rather than the two-year budgets of recent years, because forecasting is more accurate over the shorter time frame, the ministry said.

Lapid, the new finance minister, made the decision in coordination with Prime Minister Benjamin Netanyahu.

"Building an economic working plan annually enables a reduction in the margin for error between the forecasts for government tax revenue and domestic and global economic processes and actually realizing them," Lapid said in a statement.

The minister said the large gap between two-year forecasts and how much the government actually collects in taxes had led to the current large budget deficit.

"The minister decided to submit a budget now for the rest of 2013 and all of 2014 to enable the government to immediately tackle the large deficit and implement structural changes that will encourage economic growth," the ministry said.

Israel enacted two-year budgets in 2009-2010 and 2011-2012.

Less than a year ago, the previous government under Netanyahu decided to implement two-year budgets in Israel on a regular basis, though this was never voted on by parliament.

Because of a general election held in January, a budget for 2013 has not yet been passed.

Lapid said last week he would take the tough decisions needed to bring the state's fiscal deficit-reduction program back on track.

Last year, the budget deficit reached 4.2 percent of gross domestic product, more than double an initial target of 2 percent.

The target for 2013 is 3 percent, but analysts doubt that estimated spending cuts of about 14 billion shekels($3.9 billion) and tax hikes of 6 billion currently planned will be enough to meet that goal.

(Reporting by Tova Cohen; editing by Jane Baird)