By Steven Scheer

JERUSALEM, (Reuters) – The Bank of Israel urged Wednesday’s government to approve the state budget for 2021-2022 as a deadline nears that could decide the fate of the ruling coalition. It also praised Finance Minister Avigdor Liebman’s spending plan.

The statement stressed the economic significance of the approval of the state budget now, given the fact that since the start of 2020, the economy was operating on the interim budget.

The spending package will be up for a vote in Parliament on Thursday or Friday morning. The government must pass the spending package by November 14 or else it will automatically be dissolved and new elections are required.

Because of the political deadlock, there has not been any budget ratified within three and a half years. Since then, Israel has been operating with an unpro-rated 2019 budget. This is a problem that economists claim hinders growth.

A diverse coalition made up of different parties, which took power in June to end the 12 year rule of Benjamin Netanyahu as Prime Minister, had a narrow majority in parliament. It also has frequent ideological disputes and has suffered from a thin majority. Any deviations from the coalition could lead to a sabotage of the budget vote. This would open the doors for more political chaos.

Lieberman, Finance Minister, stated earlier in the week that he expects no difficulties in passing this budget.

Bank of Israel applauded the budget plan. It said that it will not restrict economic activity after the COVID-19 crisis. The Bank of Israel also stated that the budget plan will not raise the structural deficit, which “was high even prior to the crisis”, possibly leading to a decrease in public debt.

According to the bank, the spending package over two years and the corresponding reforms in an economic plan — such as eliminating import restrictions and streamlining government regulations — “will make it easier both for the government and businesses that rely partially on government policy and anticipated actions”.