Treasury stealthily adds NIS 6.5b to defense budget

Off-budget income from equipment and arms sales negates supposed Finance Ministry defense budget cuts.

The NIS 420 million defense budget supplement that the Knesset Finance Committee approved by a 9:8 vote yesterday at the expense of mortgage subsidies is just the latest supplement of the past two years. Figures, which the Ministry of Finance has confirmed, off-budget transfers to the Ministry of Defense totaled NIS 3.5 billion in 2010, on top of the NIS 3 billion transferred in 2009, for a total of NIS 6.5 billion.

"Another lie was unveiled in the arsenal of lies by this failing government," said MK Jacob Edery (Kadima), in response to the decision. "While the Ministry of Housing claims that it has no budget for mortgages during a housing crisis, the Finance Committee decides to transfer NIS 420 million from the mortgages reserves to the Ministry of Defense, rather than use the money for its original purpose. The Housing Ministry should give answers to the public, which is crying out for housing, why this money is not being used for its intended purpose."

In addition to the off-budget transfers, the Ministry of Defense received the proceeds from the sale of equipment and arms, otherwise known as "expenses conditional on income", a privileged reserved to this ministry. These transfers are approved retroactively by the Finance Committee, and are not included in the budget. Moreover, Ministry of Finance officials decline to tell the Finance Committee the use of the budget supplements on the grounds that it is classified.

Over the next two years, the Ministry of Defense will probably continue to benefit from this mechanism, which will effectively neutralize the ostensible NIS 2.7 cut in the defense budget made by the Ministry of Finance,

Published by Globes [online], Israel business news - www.globes-online.com - on December 28, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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