Cabinet Backs $670 Million Cut in Government’s Budget for ’96

Israel’s Cabinet has agreed to slash some $670 million from the government’s $44.3 billion budget for 1996.

With the Cabinet’s approval, the 1996 budget will go before the Knesset for a final vote in October.

The 14-6 decision by government ministers to approve the cuts, reached during a marathon session during the Cabinet’s weekly meeting Sunday, came after Treasury officials warned that it was the only option if the government wanted to deal with the budget deficit while preserving the country’s economic growth.

Finance Minister Avraham Shohat argued against another option — raising taxes — a move certain to be unpopular with Israeli voters as the country’s national elections, slated for November 1996, loom ever closer.

According to Shohat’s proposed plan, the 1996 budget deficit will be $2.27 billion, compared with the $2.38 billion deficit estimated for this year.

Jacob Frenkel, governor of the Bank of the Bank of Israel, supported the Cabinet’s decision, though he had called for yet deeper cuts in spending.

Further discussions are scheduled to take place next month, when the Treasury is expected to ask the government to set national priorities and work with each ministry to cut costs.

Most of the opposition to the cuts came from ministers with social portfolios.

Labor and Social Welfare Minister Ora Namir said after the meeting that if the cuts were made, they would immediately affected society’s weaker members.

Concerns have also been raised about how budget cuts would affect defense spending — particularly as government officials attempt to estimate the cost of redeploying the Israel Defense Force in the West Bank. The redeployment will take place when the next phase of Palestinian self-rule is implemented.

Most reports place redeployment costs between $500 million and $1 billion, which would include the cost of moving IDF bases and providing new security measures for West Bank areas not under Palestinian administration.

Prime Minister Yitzhak Rabin met last week with Finance and Defense Ministry officials in an attempt to resolve the differences between the defense establishment’s request for an additional allocation of some $833 million to fund “Rainbow 2,” as the redeployment plan is called, and Treasury calls for a $200 million cut in defense spending.

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