The Finance Ministry on Thursday introduced extensive budget cuts to government ministries, with the aim of curtailing the growing state deficit which has reached 53 million shekels (roughly $14 million) – 3.8% of the gross domestic product – exceeding the government's deficit goal of NIS 40 million ($10 million), or 2.9% of the GDP.
The ministry plans to impose a NIS 1.15 billion ($319 million) lateral budget cut on all government ministries between 2019 and 2021.
Another measure aimed at filling state coffers will see a hike in the taxes imposed on luxury cars, a step that is expected to yield the treasury NIS 500 million ($140 million) in 2020 and NIS 1 billion ($250 billion) in 2021.
New taxes on petroleum products are expected to yield NIS 450 million ($120 million) in revenue.
The lion's share of the cut – some NIS 800 million ($200 million) – has been earmarked for the defense establishment and will fund several classified projects, a ministry official said.
The Finance Ministry stressed that a substantial portion of these revenues – some NIS 350 million ($97 million) – will be earmarked for government subsidies to daycare facilities, whose high costs are a hot-button issue for many Israelis, who demand the government fight the high cost of living.
Still, a Treasury official called the move a "temporary fix," noting that NIS 350 million will subsidize daycare facilities between September and December 2019. The state budget does not account for these subsidies in the next two years, he said.
The government's deficit goal for 2020 is 2.5% and for 2021, 2%. Meeting these goals would require additional budget cuts, a senior Treasury official said.
Shay Babad, director-general of the Finance Ministry, told Israel Hayom that "we don't think these steps will solve the problem. This is just the minimal action we can take during election time and with a provisional government."
