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Israel central bank chief says not to 'tighten belts' on budget yet - Metro US

Israel central bank chief says not to ‘tighten belts’ on budget yet

FILE PHOTO: Amir Yaron attends a ceremony whereby he is sworn in as Bank of Israel governor by Israel's President Reuven Rivlin, in the presence of Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon, in Jerusalem

JERUSALEM (Reuters) – Bank of Israel Governor Amir Yaron said on Wednesday he supports an expansionary 2020-21 budget to help the economy recover from the coronavirus pandemic, which has forced businesses to close and unemployment to jump.

“As long as the economy is in a phase of contraction or even a phase of recovery, we don’t want to tighten belts in a way that prevents it from growing as fast as possible and exiting the crisis,” Yaron told an online economic conference three days after a new government was sworn in.

The previous government passed a 100 billion- shekel ($28 billion) stimulus package, which has been funded by bond issues. The plan pushed up the expected budget deficit this year to at least 10% of gross domestic product, but so far Israel’s credit rating has held steady.

Yaron said once the economy and public finances were in better shape, the government must quickly return to a more responsible fiscal path.

“We will spread it over a few years. It will return us to the debt-to-GDP ratio we were at (prior to the crisis) and also we will drop to a reasonable budget deficit level,” he said.

New Finance Minister Israel Katz now has 90 days to pass a budget. Though it will probably be a two-year budget for 2020 and 2021, Yaron said he expects things will be re-examined early next year when there is less uncertainty.

Katz on Wednesday appointed Keren Turner-Eyal as the Finance Ministry’s director general to lead efforts to stabilize the economy and draft the budget.

The central bank projects a 5.3% economic contraction in 2020 and growth of 8.7% in 2021 as long as there is no second wave of the outbreak.

After weeks of a lockdown during which jobless claims soared, Israel has begun easing restrictions when its coronavirus infections declined.

(Reporting by Steven Scheer and Ari Rabinovitch, editing by Larry King and Angus MacSwan)

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