Committee chair Slomiansky: ”A preferred step as compared to painful cuts.”

Today (Tuesday), the Finance Committee authorized the raise of the deficit target for 2013 from 3% of GDP to 4.65% in order to allow the state to better adjust to the deficit, without needing further budget cuts or tax increases. Chair of the Finance Committee, MK Nissan Slomiansky (HaBayit HaYehudi): ”Every state budget is based on this rule. In the past, opposition MKs proposed that instead of cuts, the government should raise the deficit. As we have seen, the Finance Minister partly listened to this advice and therefore, we now have a request to elevate the deficit target. The increase of the target is a preferred step that will prevent the need for painful cuts, tax increases and other difficult decisions.”

The macro coordinator in the ministry`s budget department, Yugav Gardos explained the reasoning and the background for the request to raise the deficit target: ”Through legislation, the Knesset demanded that the government place two fiscal limitations upon the budget: Starting from 1992, a ceiling was placed on the deficit. The deficit is calculated as a percentage of GDP. The second limitation is on budgetary expenditure. Today the deficit target is 2.5% of GDP, which is 27 billion NIS. As of today, the target will increase to 3%, or 30 billion NIS. The last government did not succeed to pass a budget and now, as of June 2013, the 2013 budget has not been authorized and is not expected to be authorized until July 2013 making it difficult for the government to deal with the budgetary limitations. The budget deficit in 2012 finished at 4.2% of GDP, an overdraft of 2.2% (about 20 billion NIS) from the debt ceiling set that year. The gap mostly stems from a lack of tax income as compared to what was expected. This discrepancy is expected to continue in 2013-2014. Additionally, the government accepted upon itself other budgetary obligations beyond the original budget plan, increasing government spending in 2013 and 2014. The suspicion is that the deficit, without further action, will reach 5.5% of GDP.”

Gardos added, ”Therefore, we are requesting a new deficit target of 4.65% of GDP and to raise the limitation on spending by 2.2%. To summarize, in 2013 the goal will be a ceiling of 4.65% instead of 3% (40 billion NIS) and in 2014, 3% instead of 2.75% (about 30 billion NIS).”