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Steps Taken to Bring Israel’s National Budget into Line with Nation’s Galloping Inflation

September 18, 1980
See Original Daily Bulletin From This Date

Finance Minister. Yigal Hurwitz’s economic cabinet decided today to stretch the national budget to bring it in line with galloping inflation and to take tough measures against employers who exceed the government’s wage guidelines.

Today’s move will add IL 900 billion to the budget. Original estimates had projected on IL 653 billion increase. The Treasury reportedly calculated the higher sum on the basis of a 120 percent inflation rate. The adjusted budget will be 125-130 percent higher than its nominal value in terms of average prices for fiscal 1979, compared to a 65 percent increase originally calculated.

It does not take into account the proposed package deal now under discussion by the government, Histadrut and employers. It anticipates a three percent drop in consumption and a gross national product increase of only three percent, due mainly to greater exports. Hurwitz, meanwhile, continues to insist on further cuts in the various ministerial budgets.


One of the main problems in trying to balance the budget is an expected five percent short fall of tax revenues, amounting to an estimated IL 20 billion. This has been explained by the government’s austerity program which has led to a considerable drop in imports. Imports of consumer and durable goods have declined by 25 percent.

Hurwitz has ordered the internal revenue service to make good the tax shortfall by tougher collection measures. Employers and institutions which increase their manpower may be penalized by an employers’ tax levy higher than the present seven percent. Similarly, employers who grant their workers more than the 15 percent wage increase stipulated by the government will be penalized by not being allowed to make the additional expenditure tax deductible.

This measure would be directed against employers in the service sector, such as banks and other financial institutions which; reportedly, have already exceeded the 15 percent wage ceiling. It is in line with the government’s policy to shift service workers to industry and export-oriented jobs.

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