Ministries Told to Cut Budgets to Achieve a 9% Overall Reduction of Government Expenditures

The Ministerial Economic Committee has set a Friday deadline for all ministries to submit proposed cuts in their budgets to achieve a nine percent overall reduction of government expenditures.

The nine percent figure, agreed to by the committee at a meeting late yesterday, will approximate — and possibly slightly exceed — the 60 billion Shekel cut in expenditures recommended by Finance Minister Yigal Cohen-Orgad. That is regarded as the absolute minimum necessary to meet the current economic crisis.

Political observers saw the committee’s decision as something of a setback for the Finance Minister inasmuch as each ministry will decide where to retrench without direct involvement of the Treasury.

Although the Cabinet ostensibly is in full agreement that spending must be reduced by at least 60 billion Shekels and the nine percent slash was approved without dissent, some ministers were reported to be privately skeptical of Cohen-Orgad’s chances to achieve his goal. Health Minister Eliezer Shostak and Deputy Minister of Welfare Benzion Rubin, have already stated publicly that their ministries cannot absorb the proposed reductions.

TOUGHEST BATTLE EXPECTED

The toughest battle is expected over the defense budget. Defense Minister Moshe Arens has been quoted as telling a Knesset committee Monday that he would reject any notion of cutting the development budget for the Lavie, Israel’s second generation fighter-bomber. He noted that there are already some 1,500 persons working on the project.

The Ministerial Economic Committee met yesterday in an atmosphere of urgency. Foreign currency reserves stood at a dangerous low of $2.8 billion and inflation continued to soar. The Treasury reported yesterday that it printed 28 billion Shekels in new money last month.

The looming economic crisis and ways to slash government expenditures were the subjects of Cabinet meetings last Friday and again on Sunday. Various ideas were floated but so far no agreements were reached. The Treasury proposed to reduce the deficit some 15 billion Shekels by taxing allowances for the elderly and abolishing child care allowances for the first and second child in large families. The same measures, suggested last year by former Finance Minister Yoram Ardor, were rejected by the Cabinet in October.

SALARIES OF MKS TO BE CUT

The Knesset House Committee, meanwhile decided yesterday to cut the salaries of Knesset members by 10 percent and to ask MKs to take an additional 10 percent cut voluntarily. The money saved would be tumed over to the Treasury. The MKs got a 57 percent raise in salary last October.

But Yossi Sarid of the Labor Alignment opposed the idea. He contended that the money raised would not find its way to the general budget but would be used for some cause dear to the Likud regime, such as building new settlements in the occupied territories.

According to an opinion poll published in The Jerusalem Post Monday, 72 percent of the public put settlement building on the West Bank at the top of the list of proposed budget cuts within the framework of a national austerity program. According to the poll, this view was shared by both Labor and Likud voters.

Other expendable items in order of priority were development projects such as the Lavie, and the Mediterranean-Dead Sea canal (52 percent); higher education (29 percent); and the absorption of new immigrants (27 percent).

In another development Bank of Israel Governor: Moshe Mandelbaum urged the public yesterday not to withdraw cash from their bank accounts even though interest charges on overdrafts are slightly higher than inflation. Israelis are allowed to write checks in amounts in excess of their bank balance and are charged a high rate of interest for the privilege. It is deducted quarterly.

Customers at most banks had interest on their overdraft for the last quarter deducted from their accounts Monday. The banks warned that if the public continued to incur overdraft debts at the October-December level, they would have to pay double the amount of interest three months from now.

Meanwhile, Maariv has published an analysis of prices and average-earnings over the past year which showed that Israelis had to work much harder at the end of 1983 than they did at the beginning of the year to buy the same articles. While a person had to work 6.5 minutes to earn a kilo of frozen stewing meat in January, he had to work 10.2 minutes for the same meat in December, 1983.

Other figures showed that a fifth of wine which required 48.5 minutes labor in January, demanded 52 minutes in December; The tabor needed to purchase one kilo of sugar went from 6.5 to 10 minutes; a loaf of challah from 2.5 to 5.5 minutes; a locally manufactured refrigerator from 230 to 270 hours; an oven from 167-178 hours; a color television from 285-346 hours; airline tickets to London 86-129 hours; a small Fiat car 15 months-21 months; and a three room apartment in Tel Aviv, 129-170 months.

The longer hours were the result of inflation and the reduction of government subsidies which sent prices up faster than cost-of-living increments.