Bank of Israel: Proposed War Budget "Insufficient"

The Central Bank of Israel said on Wednesday that the proposed amendments to the state budget are insufficient and that the government needs to show more financial responsibility in addressing the economic impact of the war in Gaza.

The central bank's statement came after Prime Minister Benjamin Netanyahu late last night gave his initial approval for budget changes aimed at helping cover the consequences of the war.

Netanyahu and his finance minister said the proposed war budget would be financed by increasing the deficit, channeling money from ministries, and cutting controversial budgets agreed upon in coalition deals with religious and ultra-nationalist parties, according to Reuters.

The revised budget will need approval from the Cabinet and Parliament.

The Bank of Israel said: “In addition to the need for a budgetary response to meet the needs that arose due to the war, even in times of emergency, it is extremely important to maintain a responsible fiscal framework.”

It added in a statement that Finance Minister Bezalel Smotrich proposes increasing the 2023 budget by 31 billion shekels ($8.21 billion), including 22 billion shekels for the Ministry of Defense and $9 billion for civilian expenditures, in addition to reducing spending by 4 billion shekels.

The Central Bank said that this reduction of 4 billion shekels "is not large, and therefore its contribution to enhancing the credibility of the government's commitment to financial adaptation to the costs of the war is limited."

The bank explained that the government must cut the 2024 budget to help cover expenses this year, including money to secure the coalition agreement, which economists have warned will hurt growth.

The money raises a great deal of controversy because it will encourage ultra-religious people who are exempt from mandatory military service to remain out of the workforce.