JERUSALEM, May 5 (Xinhua) -- The Israeli government approved on Sunday the Finance Ministry's bid to raise the deficit target in the 2013-2014 budget.
The new deficit target will stand at 4.65 percent of the Gross Domestic Product (GDP), an estimated sum of 47 billion shekels (13. 2 billion U.S. dollars), instead of the previous target of 3 percent of the GDP in 2013.
In addition, the target deficit for 2014 is expected to stand at 3 percent of the GDP instead of 2.75 percent of it. Due to the higher deficit target, the treasury would expedite by two months the planned one-percent increase in the value-added tax (VAT), from 17 to 18 percent and the hike would take place on June 1 instead of August 1.
Israeli Finance Minister Yair Lapid is currently working on forming a budget for 2013-2014, which must be authorized by both the cabinet and the parliament by June 9.
The new budget must handle a growing deficit of 11 billion U.S. dollars accumulated throughout 2012 in the state's treasury, necessitating budget cuts and tax hikes.
Two weeks ago, Lapid introduced an outline of the budget cuts and tax hikes to Prime Minister Benjamin Netanyahu, to include 5 billion U.S. dollars in cuts of governmental spending and tax hikes of approximately 1.4 billion U.S. dollars.
Bank of Israel (BoI) governor Stanley Fischer did not attend the Sunday cabinet meeting and had in the past opposed raising the deficit target. He is set to finish his role in June upon his January resignation.
The international rating agency Standard & Poor (S&P) lowered Israel's local-currency credit rating over the weekend, due to reports of the planned raising of the deficit ceiling.