New Finance Minister Bezalel Smotrich says he believes in free-market policies and intends to largely follow in the footsteps of his predecessor Avigdor Liberman as he took control of the Treasury during a handover event on Sunday.
“I am a liberal person and I want to remove barriers to encourage the free market and increase competition as much as possible,” Smotrich said at the ceremony in Jerusalem. “I’m not sure all of our steps will be popular, but hopefully they will prove to be correct over time.”
Smotrich, leader of the far-right Religious Zionism party, cited the rising cost of living in Israel as one of the main challenges facing the Israeli economy and stressed the importance of maintaining fiscal discipline and budget restriction.
Previously, Smotrich had suggested that Torah laws would dictate Israel’s economic policy once he takes office.
“We are facing a difficult period of economic events such as inflation and rising interest rates, and I believe that we will overcome it and restore confidence in the Israeli financial system – and, therefore, investors” , Smotrich said.
Speaking to Smotrich, outgoing finance minister Liberman warned that the role of the finance ministry was not just to “guard the coffers” but to generate revenue to create a track that will allow more freedom to act in the budget decision-making.
Liberman appeared to refer to coalition agreements signed by the new government that are expected to increase social benefits for ultra-Orthodox, who have low employment rates.
Quoting Pirkei Avot, a compilation of ethical teachings and maxims from rabbinic Jewish tradition, Liberman warned: “Without flour [an allegory for work] there is no Torah, therefore you will have to produce a lot of flour in view of the demands of your partners [ultra-Orthodox parties Shas and United Torah Judaism].” He added: “There is no well-being without profits.”
“There are huge challenges here. At the top of the list is the construction of the state budget,” he said.
Liberman urged Smotrich to work closely with Treasury Department officials, whom he described as “smart, open-minded people.”
Smotrich said he came to terms with Liberman on many issues after the two held an hour-long meeting.
“I come here with a lot of humility and a desire to learn in order to advance the State of Israel, strengthen the economy and state revenues and help the people most in need,” said said Smotrich. “Liberman has done a very good job here at the ministry and taken courageous and unprecedented steps, and I hope to continue in his footsteps…to leave a stronger finance ministry to the minister who comes after me.”
Smotrich takes over from Liberman with Israel’s economy expected to slow significantly this year and the rising cost of living, driven by housing and energy prices. Prices for a range of essential services and products rose at midnight, sending consumers steep increases in the cost of petrol, water and electricity, as well as other items.
Inflation accelerated to 5.3% in November over the previous 12 months, hitting a new 14-year high and putting pressure on the central bank to raise the benchmark interest rate for a seventh back-to-back meeting on Monday. In December, the Finance Ministry cut its growth outlook for the Israeli economy from 3.5% to 3%, citing a contraction in consumer spending and a slowdown in the global economy, which is expected to grow at a rate of about 2.2%.
The economy is expected to have grown at a rate of 6.3% in 2022, following its even faster expansion of 8.1% in 2021, the year of recovery from the COVID-19 pandemic.