The Bank of Israel today publishes its 2021 work plan and budget

The total budget is approximately 7.5 percent lower than the budget for 2020.

Today, the Bank of Israel is publishing the main provisions of its work plan and administrative activity budget for 2021. The Bank of Israel’s Supervisory Council[1] discussed the Bank's annual work plan, approved the Bank's annual budget for administrative activity, and submitted the budget to the Knesset Finance Committee, as required by the Bank of Israel Law, 5770–2010.

The Bank of Israel has a critical role in managing the economic crisis deriving from the COVID-19 pandemic, in strengthening and supporting economic activity in Israel, and in promoting the renewed growth of the economy. The Bank did this over the past year both through various policy measures that it led and through providing economic advice to the government on various issues. In the Bank’s activity in 2021, as well, emphasis will be placed on the exit process from the crisis and on encouraging growth and economic activity, as reflected in the Bank’s work plan and budget.

Following are the targets set by the Bank’s management for the Bank’s work in the coming years:

·       Adjusting monetary policy to the changing environment

·       Strengthening the financial system and the Israeli economy’s resilience to crises

·       Consistently advancing research on the Israeli and global economies

·       Broadening the abilities to collect and extract economic data and research, and making it accessible to researchers and decision makers

·       Promoting financial infrastructures and digital means of payment in Israel’s economy

·       Encouraging competition and innovation in the financial system

·       Protecting customers’ rights, improving their negotiating position, and reducing information gaps

·       Increasing the accessibility of financial services to all citizens (financial inclusion)

·       Tightening the Bank of Israel’s connection with the public, in line with the various target population groups

·       Enhancing the professional dialogue with regulators in Israel, the Knesset, and government ministries

·       Enhancing the collaboration with international institutions and with central banks

·       Managing the foreign exchange reserves

·       Implementing the Citizens of Israel Fund Law, 5774-2014

·       Aligning the Bank with the changing environment, including the promotion of a culture of innovation and digital work space

The Bank’s budget

The Bank of Israel's budget relates to the Bank’s administrative activities necessary for performing its functions and achieving its targets.

In accordance with the Bank of Israel Law, the Bank of Israel's budget is divided into several areas of activity: 1) Management and Central Services (the expenditure budgets of the entities that deal with the management of the Bank and with the provision of services and support); 2) Performance of the Bank’s functions (the expenditure budgets of the core departments); 3) Representative office abroad (the representative office was closed in 2019, and therefore this area has been cancelled beginning with the 2020 budget); 4) Pensions; 5) Investments; 6) Income; 7) Reserve; 8) Currency issue; 9) Managing the assets of the Citizens of Israel Fund for natural gas profits, and 10) the Credit Data System.

The Bank of Israel’s overall budget for 2021 totals NIS 996 million. The budget is 7.5 percent smaller than in 2020, primarily due to a decrease in currency issue and the Bank’s investments this year.

Following are the main changes in the Bank of Israel’s budget for 2021:

Currency issue: The budget for the “Currency issue” activity area will be NIS 37 million, a decrease of 58 percent relative to 2020. This budget is impacted by the demand for cash, existing stocks, and issuance costs, and therefore it is not fixed over the years but changes each year.

Investments:  The budget for the “Investments” activity area will be NIS 38 million, a reduction of 67 percent compared with 2020. It decreased in light of the completion of several large projects in the past year, and in view of the Bank’s decision not to advance new large projects in 2021 due to the economic crisis deriving from the COVID-19 pandemic.

Credit Data System: The budget in the “Credit Data System” activity area includes the budget for a range of activities required by the Credit Data Law, 5776-2016. The budget in this area will be NIS 82 million, an increase of 9 percent compared with 2020. This increase derives from the decrease in forecast income due to the coronavirus crisis, and from continued investment in developing the system.

Management and Central Services, and Performance of the Bank’s functions: The budget for these activity areas will be NIS 525 million, an increase of 7 percent compared with 2020. This increase derives mainly from wage creep, which is impacted by collective agreements and additions to the workforce, and from growth in maintenance expenses due to the new building that began being used in August 2020.

Budget for future years: The budget for permitted commitments for coming years is NIS 252 million, of which 40 percent is designated for future commitments in respect of the operation of the Credit Data System.

The administrative activities budget does not include income and expenses stemming from the implementation of monetary tools, the provision of credit to banking corporations and to other financial institutions, activities related to managing liquidity in the economy, foreign exchange reserves investments, etc. Such income and expenses are reflected in the Bank of Israel's financial statements and in the Investment of the Foreign Exchange Reserves report of the Bank.

Table 1: The Bank of Israel’s Budget for 2021

(financial data in NIS thousand)