Coronavirus crisis

Government reportedly close to deal on NIS 80 billion rescue package

Some NIS 5 billion of bailout would go to small business struggling as coronavirus restrictions take major toll on economy, according to report

An Israeli man walks past closed stores in the empty Mamila Mall in Jerusalem on March 23, 2020. (Nati Shohat/Flash90)
An Israeli man walks past closed stores in the empty Mamila Mall in Jerusalem on March 23, 2020. (Nati Shohat/Flash90)

Government officials are reportedly nearing an NIS 80 billion ($22.5 billion) package to help businesses struggling under the coronavirus crisis, which has shuttered businesses and left hundreds of thousands of people out of work.

The aid package seemingly began to come together during a late-night meeting between Treasury officials and Prime Minister Benjamin Netanyahu’s office, after it became clear that an earlier NIS 4 billion plan would fall well short of keeping the ailing economy alive.

According to reports, several parts of the deal remain to be hammered out, including how the money will be divied up and where all of it will go, including whether Israel’s vital tech industry will see a piece of the bailout.

The deal will include an NIS 5 billion ($1.4 billion) fund to help small business and NIS 6 billion ($1.7 billion) for large businesses. The deal also includes a fund for leveraged loans to help businesses that have already taken on considerable debt manage the credit crunch as the global economy contracts, according to the Calcalist business daily, citing unnamed sources involved in the talks.

The empty promenade and beach along the shore of the Mediterranean Sea in the city of Tel Aviv on March 27, 2020. (Tomer Neuberg/Flash90)

According to the report, during the talks, Prime Minister Benjamin Netanyahu attempted to compare the deal to a $2.2 trillion stimulus package signed over the weekend by US President Donald Trump. However, Bank of Israel Governor Amir Yaron noted that the US package is mostly made up of loan guarantees and that the country, which does not have the same deficit caps as Israel, can print money at will.

Prime Minister Benjamin Netanyahu (R) and Finance Minister Moshe Kahlon in Jerusalem on March 11, 2019 (Aharon Krohn/Flash90)

About half the money in the Israeli package is expected to come from government coffers, with the rest taking the form of  state-backed loans or tax deferrals.

According to Channel 12 news, Finance Minister Moshe Kahlon was pushing for the small business fund to completely take the form of grants so the state could quickly “issue checks” to businesses hurting from Israel’s tight restrictions on movement.

Kahlon is also seeking to up the amount of money independent contractors or freelancers receive, according to Army Radio.

Since Wednesday, Israelis have been forbidden to leave the immediate vicinity of their homes except for essential needs in a bid to stem the spread of the virus, which has so far sickened over 3,600 people, according to the Health Ministry.

Jerusalem Municipality workers close the entrances to the Mahane Yehuda market in Jerusalem on March 24, 2020 (Yonatan Sindel/Flash90)

The measures were the latest in a series of restrictions that have forced many businesses to shut down, with the government set to meet Sunday on possibly sharpening the restrictions even further and possibly imposing a full lockdown.

The empty Carmel market in Tel Aviv on March 24, 2020, following the government’s orders to keep all bars, restaurants, malls, and markets closed in an effort to contain the spread of the coronavirus. (Miriam Alster/Flash90)

Over 750,000 people, more than 20 percent of the workforce, have filed for unemployment since the start of March, as the virus restrictions first hit the tourism industry and later reverberated through the rest of the economy.

The Bank of Israel and Finance Ministry have offered increasingly dire predictions about the virus’s impact on the economy after initially estimating a hit of less than 1% to Israel’s GDP.

On Tuesday, Yaron said that if the current economic shutdown continues until the end of April, it would cost the economy some NIS 50 billion ($13.9 billion), or 3.5% of GDP. An additional month of stagnation would increase the cost to some NIS 90 billion ($25 billion).

If restrictions are tightened further, and continue until the end of May, the damage could amount to NIS 126.8 billion ($35 billion), Yaron cautioned.

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