Cabinet to Weigh Budget Cuts but Ministers Still Opposed to Increases in Their Bailiwicks

The Cabinet will meet in special session tomorrow to consider Finance Minister Yehoshua Rabinowitz’s call for ministerial budget cuts in the neighborhood of IL 2 billion to compensate for the unexpectedly high rate of inflation. The matter was taken up at the Cabinet’s regular session on Sunday at which various ministers objected strongly to the cuts.

Although a decision was deferred for one week the government apparently decided that it could not delay action on urgent fiscal measures. Nevertheless, most observers doubt that the Cabinet will take any decisive action tomorrow. Rabinowitz has been meeting privately with his ministerial colleagues during the past two-days in an effort to persuade them to accept the cuts. But most of them remain firmly opposed. These include the ministers of defense, housing, education and health.

The Finance Minister is proposing, in effect, that each ministry absorb inflationary price increases by cutting their expenditures. Rabinowitz explained that this is necessary because inflation is rising at the rate of more than 30 percent instead of the anticipated 25 percent.

Meanwhile, Maariv reported today that the long delayed added value tax will go into effect July 1, precipitating a new wave of price increases. According to the paper, some of the increases will stem from the new tax and others from the government’s plan to reduce its subsidies for basic food products.

Maariv said the price of gasoline would rise 8-10 percent on top of the 15 percent price hike of last March. The price of electricity will go up by the same amount as the added value tax. The latter rate has yet to be determined but is expected to be between 5-10 percent, Maariv said. The paper said food prices would not increase until August. Histadrut has demanded that the government keep the lid on food prices at least until October.