ISRAEL AT WAR - DAY 142

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After Moody’s downgrade, opposition MKs slam Smotrich for Haredi spending, Arab community cuts

Finance Minister Bezalel Smotrich attends a Finance Committee meeting at the Knesset on February 12, 2024 (Yonatan Sindel/Flash90)
Finance Minister Bezalel Smotrich attends a Finance Committee meeting at the Knesset on February 12, 2024 (Yonatan Sindel/Flash90)

Lawmakers slam the government’s amended 2024 budget in the Knesset Finance Committee, blaming Finance Minister Bezalel Smotrich and other members of the coalition for Israel’s battered credit rating and accusing them of damaging the economy.

“In my view, there has never been such a large gap between talk and action in the economic policy of the State of Israel,” declares National Unity MK Orit Farkash-Hacohen, asking Smotrich to task his ministry with evaluating the economic cost of extending the terms of IDF soldiers while some sectors of the population “are not recruited at all.”

“It is not for nothing that the rating companies expressed distrust and after 36 years made a heavy decision,” she said. 1988 was the first year Israel’s credit was rated by a major international ratings agency, Standard and Poor’s (Moody’s and Fitch followed in 1995).

US agency Moody’s downgraded Israel credit rating last week, explaining that the “aftermath and wider consequences” of the war “materially raise political risk for Israel.”

“The war was an opportunity for the Israeli economy to produce the change” that is needed, adds Yesh Atid MK Naor Shiri, “but this is not happening.” He calls the Moody’s report “an opportunity… to make difficult changes” and also demands “a professional finance minister.”

“Do you not see a connection between the budget and the downgrade,” asks fellow Yesh Atid MK Meirav Cohen, calling out the government’s NIS 9 billion ($2.4 billion) deficit and alleging that the budget’s use of coalition funds for the ultra-Orthodox sector “encourages evasion, encourages poverty and encourages studies that are not core studies.”

“To come and increase the budgets at this time for people who do not enlist in the army and do not participate in the employment market is an economically irresponsible policy,” she says.

The revised budget has come under criticism from MKs for leaving ultra-Orthodox education budgets uncut despite many of the community’s schools refusing to teach core secular studies. At the same time, both coalition and opposition lawmakers have slammed the government’s proposal to extend service time for both standing army and reserve IDF soldiers while a majority of the ultra-Orthodox community does not serve.

“It is natural that after every war there are horizontal cuts, but here we are talking about an offensive decision that hurts many sectors and populations and the Arab population the most,” says Hadash-Ta’al chairman Ahmad Tibi, referring to plans to cut about 15% of funding for a five-year plan intended to advance the social and economic integration of Arab Israelis.

According to the Kan public broadcaster, the Shin Bet and National Security Council warned last month that such cuts could “intensify the risks of an outbreak of violence.”

To pay for the defense spending increase of around NIS 70 billion ($18.6 billion), the budget includes an across-the-board cut of 3 percent from all government ministries with some exceptions. It also slashes around NIS 2.5 billion ($670 million) out of NIS 8 billion in coalition funds — discretionary funds earmarked for pet projects of MKs and ministers, and contains a deficit target of 6.6% of GDP.

Notably, the current plan does not contain any provisions for reducing the number of government ministries, despite the Finance Ministry’s recommendation that 10 superfluous ministries — including the Settlements and National Missions Ministry, the Jerusalem and Jewish Tradition Ministry, and the Intelligence Ministry — be closed to cover the wartime shortfall.

Addressing lawmakers, Smotrich says that “there are no cuts in unimportant things, everything is important” and that the war “requires severe cuts and all sectors and all ministries are experiencing this. I tried to make it balanced.”

“I don’t think we in the treasury and the government have all the wisdom. If there are good comments, we will listen to them and implement as much as possible,” he declares.

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