(Contributed by the Finance Ministry spokesperson)

Minister of Finance Dr. Yuval Steinitz today submitted his recommendation for the implementation of the biennial budget method to the combined committee of the Finance Committee and the Constitution, Law and Justice Committee. In addition, the Minister presented a quarterly macroeconomic review to the Finance Committee. The Finance Minister’s recommendation is that the basic rule should be a biennial budget. Nevertheless, the budget will be a one-year budget if one of the following cases is met: The holding of general elections or due to an unusual situation making it impossible to reasonably determine forecasts with regard to the basic economic parameters pertaining to the years of the biennial budget.

This recommendation was formulated after the Finance Ministry performed comprehensive staff work that was led by the Ministry’s acting Director General, Doron Cohen, in cooperation with all the divisions of the Ministry and using information that was obtained from the Directors General of the government ministries and from academia, along with professional information obtained from the International Monetary Fund and the OECD, examining the performance and characteristics of the biennial budget method that was implemented between 2009-2010 and 2011-2012.

The main advantages that were identified with the biennial budget method are: Creating proportion between the planning stage and the implementation stage, so that the government will devote most of its time to implementing the budget in accordance with the plan. A few of the government ministry directors general noted that preparing a budget once every two years represents a significant savings in time and makes it possible to free inputs for strategic thinking and planning; creating a high level of certainty for the government and the economy; at the national level, creating political stability has an economic and systemic value that affects all sectors of the economy and society.

Nevertheless, and unlike making a forecast for a single year, it is only natural that making two-year forecasts increases exposure to macroeconomic changes.

The introduction of a two-year budget has received the support of leading economic bodies around the world, such as the OECD and the International Monetary Fund, which stated the following about Israel last month in its annual report: “The Israeli economy continues to be strong. The reasons for this statement included Israel’s strong fiscal policy, the budgetary expenditure rule, and maintaining an innovative two-year budget framework, which has significantly strengthened the government’s planning and actual implementation of the government’s expenditures…”