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Friday, April 9th, 2010

As reported in Invest in Israel, The Israeli Cabinet approved Finance Minister Yuval Steinitz’s pr

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oposal to continue with the biennial state budget model in 2011-2012. The 2-year model, which was also backed by the Bank of Israel, will allow the government to present a long term plan and maintain market stability.

“We see the government’s decision to adopt two-year budgets as integral to the success of the new fiscal rule,” Peter Doyle, head of the most recent International Monetary Fund mission to Israel, said. “It will avoid the burden of annual budget negotiations and thereby allow greater focus on efficient implementation of expenditure policies.”

The ministers also unanimously approved Steinitz’s proposal to implement a calculation system that would increase the government’s annual expense rate from 1.7% to 2.6%.

“Firm commitment by the government to this rule, starting with the next budget, will help to anchor market expectations and confidence,” said Doyle. “This is critical given still heightened uncertainties in the global economy as well as ongoing geopolitical issues in the region.”

The parliamentarians are expected to pass the budget with minimal changes by the end of 2010.