The Cabinet today unanimously approved a $23 billion budget for fiscal year 1985, presented by Finance Minister Yitzhak Modai. According to Modai it is a step toward solving the economic crisis.
Although only marginally smaller than the budget for fiscal 1984, it represents a reduction of nearly $2 billion from last year’s actual spending. The effects of the new budget will be to reduce living standards by about five percent. There will be a similar drop in real wages and higher taxes. Increased unemployment is considered inevitable.
Modai, the target of criticism from his colleagues when he first presented his draft budget last week because he did not cut enough, emerged satisfied from today’s Cabinet session. He cautioned, however, that what was approved was a budget “framework.” The budgets of each ministry have yet to be made final and changes are possible.
DISPUTES EXPECTED OVER PROPOSED CUTS
Modai hinted that he expects disputes over the proposed cuts in the defense and educations budgets. The defense budget stands at $4 billion, of which $2.6 billion comes from local resources and the balance from U.S. military grants-in-aid, mainly in the form of military equipment.
Modai said one question mark hovering over the defense budget is the cost of withdrawing the Israel Defense Force from south Lebanon, an operation begun last week. He said it is too early to foretell the exact cost but it is estimated in the neighborhood of $140 million.
The Treasury, fearing that each ministry will challenge its budget, plans to submit a bill to the Knesset which would ban by law deviations from an approved budget.
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