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Finance Ministry Intends to Reduce Public Spending, Against Global Trends

Yogev Gardus of Ministry of Finance called for “fiscal prudence” on public spending and private sector infrastructure investments, despite most developed countries’ moving in the opposite direction

Yogev Gardus, head of the Budget Department in the Ministry of Finance, in the Knesset (Photo: Dani Shem Tov)
Yogev Gardus, head of the Budget Department in the Ministry of Finance, in the Knesset (Photo: Dani Shem Tov)
By Jonathan Kershenbaum

Israel’s new government appears to continue with its predecessor's fiscal policy, in its proposal for the long-elusive new budget: limit public spending in favor of debt reduction.

Yogev Gardus, head of the Budget Department in the Ministry of Finance, presented the Ministry’s overview of macroeconomic data to the Knesset Finance Committee this week, in preparation for the budget building process. Gardus refrained from mentioning any specific data regarding the proposal itself, but mentioned that the Ministry of Finance supports a return to “fiscal prudence”, meaning a gradual decrease in spending and government debt.

“We’ve lost our strategic asset of 60% debt to GDP,” said Gardus. “We believe that we should get to work now on restoring that asset.” The debt-to-GDP ratio indicates the amount of the country’s debt compared to its’ gross domestic product (GDP), with 60% as a stable intermediate number. 

Those statements were said in direct contrast to statements made by the Bank of Israel and other international organizations like the IMF and OECD, which emphasize public spending over debt reduction

Gardus also restated the Ministry of Finance’s intention to base the infrastructure investment package on the private sector as opposed to the Bank of Israel, which has suggested funding most of it out of government spending. 

“These investments have high rates of return, but there is no particular reason for the government to engage in them instead of the private sector,” said Gardus.

This is despite staggering disparities between Israel’s infrastructure investments and those of other developed countries. According to Gardus, Israel’s metropolitan areas demand investments of 250 billion shekels to reach the average level of investment in other developed countries. In Tel Aviv, investment in public transport infrastructure per resident is 2,000 dollars, compared to about 15,000 dollars in Paris, and 25,000 in Munich.

Gardus also presented data that shows a marked decrease in public spending over the last two decades. Compared to civilian expenditure (public services) worth 35% of GDP in 2002, Israel’s spending on public services was just above 32% in 2019. This is while spending on debt service has been falling considerably over the past decade, thanks to low interest rates worldwide.

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