(Israel) Finance Ministry plans to raise water rates, cut health basket

Globes ^ | 8 September 2003 | Zeev Klein

[anotherview]

Finance Ministry plans to raise water rates, cut health basket

Other measures in the 2004 budget include a deep cut in defense spending.

Zeev Klein 8 Sep 03 17:38

It's now official: the 2004 budget deficit target will be raised 1% to 4% of GDP, amounting to NIS 20.5 billion. In order to meet the new deficit target, Minister of Finance Benjamin Netanyahu proposes a NIS 10 billion budget cut. The main measures proposed by the Ministry of Finance are as follows:

• Cutting the Ministry of Defense budget by NIS 3 billion. The cut has not yet been approved. Prime Minister Ariel Sharon will decide on the subject at a meeting next Sunday with Netanyahu, Minister of Defense Shaul Mofaz, and IDF Chief-of-Staff Lt.-Gen. Moshe Yaalon. If Netanyahu's proposal is accepted, it will mean a NIS 6 billion cut to the defense budget compared with 2002, before the supplementary budget promised by Sharon.
• An 11% across-the-board cut in the budgets of all civilian ministries, including education, health, and social services, amounting to NIS 2.5 billion.
• Withdrawing the accumulated aggregate NIS 1.5 billion surplus from the Avner and Karnit Motor Vehicle Accidents Victims Insurance Associations. Even after the withdrawal, there will still be sufficient money to continue the vehicle insurance reform.
• Raising water rates for households and industry by NIS 0.15 per cubic meter, generating NIS 200 million in revenue.
• Cutting housing subsidies by NIS 200 million.
• Cutting the health basket by NIS 250 million.
• Abolishing the tax exemption for early pensions, generating NIS 350 million in revenue.
• VAT will stay at 18%, generating NIS 2.5 billion in revenue. Netanyahu might reduce VAT during the year through an administrative order, provided state revenues are sufficient.

The Ministry of Finance is retaining its 2.5% growth forecast for 2004, despite the recent developments in relations with the Palestinian Authority. The ministry assumes business product will increase by 3.6%. The inflation target, which also defines the price stability target, will be kept at 1-3%.

Published by Globes [online] - www.globes.co.il - on September 8, 2003

[anotherview]

A true measure of how much the Israeli economy has been hurt by the Palestinian conflict is the deep defense cuts in time of war. All the more reason the IDF has to do it's job now and stop worrying so much about world opinion.

[zacyak]

Cutting the Ministry of Defense budget by NIS 3 billion.

Interesting, how much is that in US dollars? I've heard that the US insisted Israel tighten its belt after we fronted them $9 billion in loan guarantees, too bad our own government isn't following the same course.

[anotherview]

Interesting, how much is that in US dollars?

About 670 million dollars. If that doesn't sound like much you must remember that Israel is a tiny country (about the size of New Jersey, including the territories) of 6 million people with a much smaller budget than the U.S.

[zacyak]

Yes, that certainly is a significant cut.