Widening fiscal deficit threatens Israel's 2024 budget

• Published date: 14 September 2023

Due to this, a cut in the state budget for next year may be required, even before 2024 begins. The Ministry of Finance is currently preparing a report, which examines current expenditure and deficit forecasts, compared with the calculations made during the preparation of the 2023-2024 budget. Minister of Finance Bezalel Smotrich, is required to submit the report to the Knesset Finance Committee in November

An annual deficit of up to 3% is not a big disaster by worldwide comparative standards, but it still requires a reorganization of the budget. If it turns out that the differences compared with the original plan are too large, and cannot be bridged through the reserve put aside for such a case, the government will be required to prepare a budget balancing plan that will cover the difference. Such a plan could include cutting government spending on various projects, or alternatively, taking measures to increase state revenues, such as canceling the reduction of the excise tax on gasoline, which would lead to a jump in the price of fuel.

Smotrich's deadline to finally approve any budget balancing plan for the 2024 budget is December 15. If he does not succeed in bridging the difference, and it turns out that the deficit and spending gaps are still too large, the government will be required to approve a reduction in the budget items. The law takes into account an event in which the government does not implement the cuts imposed on it. In such a scenario, the state budget will simply not go into effect, and 2024 will open without an approved budget. The government will be given an extension to submit a budget balance plan to the Knesset by the end of March, and until then the state will operate...