Treasury warns war compensation fund nearly empty

• Published date: 26 October 2023

When the war broke out, the fund amounted to NIS 18 billion. At least NIS 5 billion of which will be dedicated to compensation for the direct damage caused to the towns and villages that have been damaged during the war. Another NIS 4.5 billion is supposed to compensate the businesses but this is likely an underestimation. These estimated amounts are only for October. The compensation outline for businesses presented by Minister of Finance Bezalel Smotrich has been harshly criticized by the public as being insufficient and was also slammed in the Knesset Finance Committee. Now, it is estimated that the cost of the plan will further increase

Smotrich became Minister of Finance at the start of the year without an approved state budget and without the ability to allocate funds for new decisions. As part of the coalition agreements, Smotrich pledged to abolish the tax on plastic disposable plates and utensils, as demanded by the ultra-orthodox parties. He was required to find a budgetary source, top cover the loss of state revenues. In the absence of an approved budget, he deducted NIS 2.25 billion from the Compensation Fund. This money has already run out, after being used to finance the repeal of the Plastic Utensils Law, as well as for other needs.

Even so a senior source in the Ministry of Finance soothes concerns that residents will not receive compensation for damage. "Even if money was moved out of the fund, everything that was saved there still belongs there," he stresses. "The fund will be able to respond according to the amount meant to be in it."

Markets are concerned about Israel's debt

Meanwhile the markets are rating agencies have expressed concern about the way the government is financing war damage. Over the past week, the world's three biggest ratings agencies have indicated that Israel's credit rating will be cut if the fighting expands into a protracted multi-front war. Fitch and Moody's have placed Israel on review for downgrade of its credit rating and S&P cut Israel's credit outlook from stable to negative.

The markets, it seems, were not overly concerned by S&P's announcement. Market sources say that the Tel Aviv Stock Exchange (TASE) has already priced in the more significant damage of a cut in the credit rating itself.

"It is more correct for the Ministry of Finance to raise long-term debt"

If Israel's credit rating is indeed...