Israel's budget in 2009 will total 315.8 billion shekels ($92.6 billion) with the increase in government expenditure capped at 1.7 percent, the Finance Ministry said on Sunday.
The proposed budget is based upon estimated growth of 3.5 percent in Israel's gross domestic product in 2009, Finance Minister Roni Bar-On said, presenting the ministry's budget targets to the cabinet.
"Preserving fiscal discipline is one of the sources of strength of the Israeli economy ... and is proof of our ability to maintain responsible economic policy despite political instability and the geopolitical reality," Bar-On said.
"Priority should be given to the continued reduction in the debt-to-GDP ratio, with the aim of reaching 58 percent by 2015, which is the average of OECD countries."
The ministry has forecast that the debt-to-GDP ratio will fall to 78 percent by the end of 2008 and 75 percent at the end of 2009 from 81 percent currently. Defence expenditure will amount to 17.8 percent of the 2009 budget while debt repayments will total 31.8 percent.
The government's expenses excluding debt and interest payments will be capped at 234.8 billion shekels while revenues next year are forecast to reach 227.6 billion shekels.
The budget deficit, as required by law, is expected to be 1 percent of GDP. The ministry said government decisions, agreements and obligations will result in a net increase in expenses of 12.8 billion shekels. Therefore, 8.8 billion shekels in adjustments to the budget will be needed to keep to the ceiling of a 1.7 percent increase in expenses.
Yoram Ariav, director-general of the ministry, said reducing the debt burden supports an increase in Israel's sovereign credit rating, a reduction in interest expenses and greater government flexibility in times of crisis.