Finance Ministry officials warned that any further delay in passing a state budget could prompt international credit agencies to downgrade Israel's ranking, something that would have immediate and serious repercussions on the state's ability to raise capital overseas, Channel 12 News reported Monday.
Israel has a solid international credit rating from all three leading agencies, with an S&P ranking of A+, a Moody's ranking of A1, and a Fitch ranking of AA-.
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All three give the Israeli economy a stable outlook, but with their delegates slated to visit Israel next week to assess how the country is dealing with the coronavirus crisis, the Finance Ministry fears the absence of a state budget could promote them to give a less favorable review.
Likud and unity government partner Blue and White have been at odds on the question of whether to pass a one-year budget or a two-year one.
Blue and White demand that Likud endorse a biennial budget, as stipulated in the coalition agreement, but Prime Minister Benjamin Netanyahu prefers a single-year budget.
Under Israeli law, if the government is unable to pass the annual budget within 100 days of its formation the Knesset must dissolve and elections must be held.
This means that that state budget, regardless of its duration, must pass by Aug. 25, Accountant General Rony Hizkiyahu said.
Failing to pass the state budget would not only spell elections – the cost of which would deal the Israeli economy a serious blow – but also risk the country's international fiscal standing, something it cannot afford to happen in the midst of the worst economic crisis it has ever experienced.
"We have to be very careful," Channel 12 News quoted Hizkiyahu as saying. "The absence of a budget after three election campaigns indicate poor government stability, and the rating agencies could see that as an indication to downgrade the rating."
Speaking at the Likud faction meeting on Monday, Netanyahu said, "We have to pass the budget immediately so we can appropriate more funds to the public and afford the economy some certainty and stability.
"Insisting on a two-year budget instead of an immediate one means extensive curbs and imposing painful measures [on the public]. It's the exact opposite of what we should do."
He further stressed that "there is no reason to hold elections that no one wants."
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