Finance Minister Avigdor Liberman on Tuesday said there will be no new taxes imposed on citizens but that his ministry will take a conservative approach to fiscal policy, curbing spending and focusing on priority areas while striving to lower the government deficit and the debt-to-GDP ratio.
Liberman spoke at the annual Eli Hurvitz economic conference in Jerusalem held by the Israel Democracy Institute.
The previous three years, before the new government was formed, saw no budget talks, reforms or legislation and an economy that ran on autopilot because of the “deep political crisis” that gripped the nation, he charged.
As Israel was grappling with the coronavirus pandemic while stuck in political gridlock, the budget deficit surged to some 12% and debt-to-GDP rose to over 70%, Liberman said.
Recent talk of increasing debt levels in light of the pandemic-induced crisis is not appropriate for the Israeli economy, he said. “We are a small player in a global economy,” he said. The US, the UK and Japan are economic powerhouses, he said. “We are not like them, we are different…we must know our place.”
Were Israel to go on a “crazy” spending spree, he said, the IMF and the OECD would sound the alarm, ratings companies would lower Israel’s ratings and interest rates would rise. “That will mean losing control of our economy,” he said.
“We will pursue a responsible state policy, without cuts, without taxes, we will not go berserk with all the political pressures that exist. We are not the US. We do not have a machine that prints dollars.”
Liberman said he was aiming to set up a 14-month national budget to be approved in November, but passing it with the very narrow majority currently enjoyed by the coalition would be “very hard.”
The Finance Ministry will meet in two weeks to discuss its policies in depth.
Emphasis will be on promoting growth via investments and increasing productivity, increasing government efficiency while cutting back on redundant activities, and providing a social safety network to needy populations.
He said that infrastructure projects should be financed by government funds in partnership with local institutional investors and the private sector, which are looking for investment avenues, and institutional investors should be encouraged to invest in innovation by removing regulatory hurdles that stand in their way.
Like other global nations, Israel will approve the OECD’s digital tax treaty as well as the global carbon tax policy, Liberman said. He added that he will act to allow Israel to import products that have been approved by global standards regulators, without the need for further approvals from the local standards institute, to ease imports and lower prices.
The blanket furlough program initiated to help workers during the pandemic will be halted as planned, he said, but will continue to target employees in fields that have not yet returned to pre-pandemic activities, especially in the travel and tourism industries, and other specific individuals.