(Bloomberg) -- Israel's parliament narrowly approved the country's first spending plan in three years, keeping Prime Minister Naftali Bennett's unruly government alive as it seeks to solidify an economic rebound.
The 2021 budget passed by a vote of 61-59 on Thursday, according to a spokesman for parliament. Bennett's coalition would have fallen if it had failed to pass, returning Israel to the political chaos that eased when Benjamin Netanyahu was unseated in June.
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The budget approval ought to encourage investors and rating agencies seeking guidance on how the government plans to control its debt pile, which ballooned nearly 21% last year to 72.4% of output as Israel grappled with the coronavirus pandemic. The budget deficit target was set at 6.8% of gross domestic product, including virus-related expenses.
Bennett called the passage of the spending plan “a red-letter day for Israel.” Lawmakers are to reconvene Thursday to vote on the budget for 2022.
Yohanan Plesner, president of the Israel Democracy Institute and a former member of Knesset for the centrist Kadima party, said Thursday's vote “symbolizes the fact that the political crisis is over, and a return to a greater level of normality and stability in the political system.
“Assuming the 2022 budget passes as well, we can look ahead towards an additional year-and-a-half of political stability,” he added.
The 2021 budget involves 609 billion shekels ($195 billion), which includes debt repayment and virus-related expenses of about 68 billion shekels, according to a Finance Ministry spokesperson. The draft budget for 2022 envisions spending of 572.9 billion shekels, with the deficit target falling to 3.9% of GDP.
The budget had been a casualty of the political turmoil that rocked the country between December 2018 and the formation of the current coalition. Lawmakers were unable to approve spending plans as the country cycled through four elections in two years, forcing Finance Ministry officials to operate under outmoded plans that couldn't fully address significant problems such as backward infrastructure and productivity.
Passage of the budget therefore became a key test for the Bennett government, a grouping of parties with deep ideological differences that joined forces in the slimmest of parliamentary margins to oust Netanyahu and take on the country's economic challenges.
The opposition, led by Netanyahu, had been hoping to prise off just one member from the ruling coalition to sink the spending plan, and the government.
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While Israel's rebound has been swift -- in October, the central bank forecast growth of 7% this year and 5.5% the next -- growth has been heavily skewed toward the country's booming tech industry and unemployment remains more than double pre-pandemic levels.
“Now the government will have to deal with the priorities of the Israeli people, mainly in the areas of the economy, Covid, Iran,” said Plesner.
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