The deficit fell to 3.1% of GDP in February

In the first two months of this year, government spending totaled NIS 56.2 billion, compared with 60.2 in the same period in 2019, which is a 6.6% decrease this year. Most of the decline was recorded in the security system, where as every year, there is a higher liquidity with payments (so that it is easier to advance or postpone throughout the year than other offices).

Benjamin Netanyahu and Moshe Kahlon Photo by Alex Kolomoisky

Interest payments and repayment of government debt stood at NIS 5.5 billion at the beginning of the year. The ongoing budget for 2020 is limited to the framework of the 2019 budget plus the index, which together comes to about NIS 400 billion. The Treasury explains the decline in spending over the next two months by having a uniform monthly cap over the entire year, but there are several months in the first six months where principal and interest payments on debt will be relatively high, depending on the debt spread taken years ago.

Total tax revenues from the beginning of the year amounted to NIS 58.2 billion, a nominal increase of 8.3% compared to the first two months of 2019. However, it is important to remember that at the beginning of 2019 tax revenues were relatively low, which only heightened the suspicion that the tax authority rushed to close taxes at the end of 2018 to meet the deficit target. Following Kahlon’s pressure and public scrutiny, the 2019 bill ended with a high deficit of 3.7%.

Since debt and interest payments are the first priority, office expenses are restrained in these months to move the surplus into the following months. While the quota for the first two months was NIS 80.4 billion, actual expenses were NIS 70.7 billion. Within the Continuing Budget, the Accountant General is required to approve any unusual expenditure.

In Calcalist, it was revealed last month that it was precisely the support for the ultra-Orthodox yeshivas that was among the only expenses
That allowed the Accountant General to exceed the quota defined in the support procedure, which stands at 70% of what was given in the previous year, and in fact gave NIS 80 million a month in exceptional circumstances, following political pressure.