Bank of Israel Governor Amir Yaron said an updated government 6.5 billion-shekel ($1.9 billion) grant initiative that gives needy individuals double the standard payment was an improvement over the initial plan, though he cautioned the government must remain careful in its spending as the economy buckles under a resurgent coronavirus outbreak.
The Israeli cabinet backed a program that will be brought to parliament for approval on Monday, Finance Minister Israel Katz said. It was modified after officials faced criticism from economists for the fact that the initial package gave the same amount of money to households regardless of their economic status.
The central bank during the pandemic has called on the government to open the fiscal taps and complement monetary stimulus that’s included bond buying and interest-rate cuts. The benchmark Tel Aviv-35 stock index fell 1% on Sunday.
Speaking Sunday at the cabinet meeting, Yaron said an updated plan to give grants to almost all Israelis made changes “in the right direction” toward boosting domestic spending after questioning if the funds could be spent more efficiently. The governor also called for a program to cut employment costs and boost investment incentives to raise demand for workers.
“The fiscal expansion in Israel is not exceptional compared internationally to other developed countries,” Yaron said. “At this stage there’s no fear in the ability to fund the economy for an extended period of time, but as long as the crisis persists and the hit deepens, it’s more important to use budgetary sources efficiently.”
Read more: Virus Fumble Exposes Netanyahu When He Needs to Look Strong
A second wave of Covid-19 cases has deepened the country’s crisis, as unemployment remains stuck at 21% and politicians warn of the potential need for a second lockdown. More than half of Israelis are afraid of not being able to cover monthly expenses, while 21% said they or a household member cut back on food over the last week, according to a new survey from the Central Bureau of Statistics.
Yaron said the new program was an improvement in that it gave cash to a group more likely to spend it on consumption, but added that the more expensive package would lead to larger government expenditures at a time when the government must consider its fiscal plans more carefully.
Israel’s budget deficit is projected to widen to as much as as 14% of gross domestic product this year as the government spends on economic support. The country still hasn’t passed a formal budget for this year, with worry growing that divisions over its length could lead to new elections this fall, which would be Israel’s fourth in less than two years.
(Updates with TA-35 index performance in third paragraph)
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