$15 Billion National Budget Has $525 Million Built-in Deficit

Finance Minister Yehoshua Rabinowitz presented the Cabinet with a national budget yesterday of $15 billion that presumes a 30 percent price increase for fiscal year 1977-78. The proposed budget is $4.88 billion larger, than the current one and carries a built-in deficit of $525 million. The deficit could be even higher unless the Treasury is able to reach an agreement with the Defense and Housing ministries to hold down spending.

The amount earmarked for defense is about $4 billion, some 13 percent less than the Defense Ministry’s share of the present budget. Strong opposition is expected from Defense Minister Shimon Peres. A more serious problem, especially during the coming election year, is the projected 30-35 percent increase in prices. Basic food products are expected to go up by 40 percent as the government gradually reduces its subsidies of those items to stay within budgetary limitations.

The periodic devaluation of the Pound will continue in an effort to stem the inflationary spiral. Non-productive workers will be laid off as further cuts in government services are effected, leading to an initial high rate of unemployment. The proposed budget is based on the assumption that the present economic malaise, the legacy of the Yom Kippur War, will continue, characterized by a high inflation rate and labor disputes over wages.

However, if the government and Histadrut are able to agree on a wage-price calling, the budget will be re-drafted, economists said. Such an agreement would give the Treasury greater control over spending and allow it to reduce the projected deficit.

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