To view this message as a file click here

Highlights of the Bank of Israel Work Plan for 2024

The Bank of Israel today published the main points of its work plan and the budget for its administrative activity for 2024.  The Bank of Israel’s Supervisory Council[1] discussed the annual work plan and approved the annual budget, and prior to the end of 2023, it submitted the budget to the Knesset Finance Committee as required by the Bank of Israel Law, 5770–2010.

 

As part of the submission of the budget, the Knesset Education Committee today held a further discussion.  At the previous discussion on January 22, 2024, Bank of Israel Governor Prof. Amir Yaron presented an economic review to the Committee members, which included a presentation of the various economic developments in view of the Swords of Iron war.  Bank of Israel Director General Shulamit Geri submitted a presentation with the main points of the Bank’s budget and its various tasks.  The presentations by the Governor and the Director General (in Hebrew) are attached.

 

The Bank of Israel’s work plan and budget for 2024 combine measures to achieve the Bank’s strategic objectives alongside measures to respond to the unique challenges facing the Israeli economy, in accordance with the developments, changes, and risks to the global and domestic economies.  This program includes widespread activity in many fields in accordance with the Bank’s statutory functions.

 

The following are the objectives that the Bank’s management set for the coming years:

  • Adapting monetary policy to the changing environment;
  • Strengthening the financial system and the Israeli economy’s resilience to crises;
  • Constant advancement of research on the Israeli and international economies;
  • Managing the country’s foreign currency reserves;
  • Diversification of the diversification, maximization, and accessibility of economic information and research to researchers and decision-makers;
  • Advancing financial infrastructure and digital means of payment in the Israeli economy;
  • Encouraging competition and innovation in the financial system;
  • Continued development and management the credit data register and regulating the credit data system;
  • Protecting customers’ rights, improving their bargaining ability; and narrowing information gaps;
  • Tightening the Bank of Israel’s connection with the public, and increasing access to financial services;
  • Implementation of the Citizens of Israel Fund Law, 5774–2014;
  • Increasing cooperation with international institutions and with central banks and regulators abroad;
  • Adapting the Bank of Israel’s resources to the changing environment.

 

Bank of Israel budget

 

The Bank of Israel’s budget relates to the Bank’s administrative activity, which is necessary for the fulfillment of its functions and the attainment of its objectives.

 

In accordance with the Bank of Israel Law, the Bank’s budget is divided into a number of fields of activity: 1) Managerial and assistance (expense budgets for the entities that deal in managing the bank and in providing services and support); 2) Fulfilling the Bank’s functions (expense budgets for the Bank’s core departments); 3) Pensions; 4) Investments; 5) Revenue; 6) Reserve funds; 7) Printing money; 8) Managing the Citizens of Israel Fund; 9) Credit Data Register.

 

The past year was filled with challenges, including challenges in the monetary field (inflation faced by Israel and the rest of the world), as well as challenges that accompanied the process of the legislative changes.

 

The most significant challenge is the one that began on October 7 with the terrorist attack launched on Israel and the Swords of Iron war that followed it.  The war is creating significant economic uncertainty and broad economic impacts in various segments of the economy.  In view of the war, the Bank of Israel is operating in all areas entrusted to it: in the financial markets and in the banking system, by implementing targeted programs immediately at the outbreak of the war; in economic advice to the government; in Banking Supervision Department guidelines; in the payments, credit, and cash fields; and in ensuring functional continuity.

 

The war situation has led to the broad mobilization of reserves, which has of course led to some slowdown in the performance of the Bank’s work plan and projects, and accordingly to lower performance rates in the fourth quarter of last year and a deferral of payments to 2024.

 

The work plan for 2024 combine measures to achieve the Bank’s strategic objectives alongside measures to respond to the unique challenges facing the Israeli economy, in accordance with the developments, changes, and risks to the global and domestic economies.  In particular, the plan includes the advancement of immediate measures to support the economy in general and people who have been directly impacted or are serving in the reserves in particular, as part of dealing with the war’s economic impact and performance of resulting targeted programs and adjustments at the bank.

 

Due to the war and its significant economic implications, the Bank’s work plans have been formulated and presented this year with the clear knowledge that they are the basis for potential changes in accordance with developments in the foreign and domestic spheres.  In this context, the challenge in finding the correct balance between the Bank’s regular activities and advancing its strategy and new initiatives becomes even stronger.

 

The Bank of Israel’s total budget for 2024 is NIS 1.2493 billion, reflecting a 12.7 percent increase over 2023.  Most of the increase is due to the growth of rigid components such as printing money, managing the Citizens of Israel Fund for natural gas profits, and wage and pension payments due to existing wage agreements, including the agreement signed in 2023.

 

In view of the high level of uncertainty as described above, and as part of the Bank’s efforts to optimize and minimize its budget, the flexibility and amount of the reserve funds were increased.

 

The following are the items in which the main changes to the Bank of Israel budget for 2024 were made:[2]

 

Printing money – This item will total NIS 108.0 million in 2024, an increase of NIS 26.4 million (34.0 percent) relative to 2023.  The increase in 2024 is due to demand for cash in the economy, and is based on the Bank’s inventory model that serves as a main tool to support decision making, and in accordance with the Bank’s policy for the orderly and continuous supply of cash for circulation, in routine and emergency times.  As such, this budget is rigid and requires the allocation of resources in order to answer the demand for cash and to address various scenarios that affect that demand.  The budget is significantly affected by changes in the exchange rate, the cost of raw materials, shipping, and the costs and quantities of actual production.

 

Credit Data Register – In April 2019, the Credit Data Register was launched, in accordance with the Credit Data Law, 5776–2016.  The budget reflects the cost of all activities required by the Law, and will total NIS 95.8 million in 2024, NIS 20.1 million (17.3 percent) lower than in 2023.  This decline is mainly due to the deferral of projects due to the large mobilization of reserves and the reallocation of budgets.  In addition, the budget includes planning of the “Business Credit Register” project, which is expected to be a complex project with particularly high costs, which will contribute significantly to increased access to business credit and to competition in the Israeli economy.

 

Managing the Citizens of Israel Fund – The budget for the Citizens of Israel Fund Management Division will be NIS 7.4 million in 2024, an increase of NIS 6.5 million (716 percent) from 2023.  In accordance with the Citizens of Israel Fund Law, 5774–2014, a fund was established to manage the State’s revenue from imposts on the profits of natural gas and oil, to be called the “Citizens of Israel Fund” (hereinafter: the Fund).  The fund’s objective is to manage the state’s revenue from the impost with a long-term economic view in order to increase its yield, and with the aim of enabling future generations to benefit from the income from this natural resource.  The Fund’s assets will be managed by a dedicated division within the Bank of Israel.  In June 2022, after accumulating NIS 1 billion, actual investment of the fund’s assets began, pursuant to the provisions of the Law and according to the policy principles of the fund’s institutions.  The increase in the division’s budget, other than wages, is intended for the purchase of technological tools, outside consulting, and databases that are in line with the variety of the Fund’s investments.

 

Budget for the coming years – The budget for authorized debits for the coming years stands at NIS 781.5 million, of which 37 percent is intended for future obligations in respect of the printing of money, and 24 percent is in respect of the Credit Data Register.

 

The budget for administrative activity does not include revenue or expenses derived from the implementation of monetary tools, the provision of credit to banking corporations and other financial entities, management of liquidity in the economy, investments of the foreign exchange reserves, etc.  These revenues and expenses are reflect in the Bank of Israel’s financial statements and in its report on the management of the foreign exchange reserves.

 

Table 1 – Bank of Israel budget for 2024

(Financial data are presented in thousands of shekels)

 

 

2024

2023 budget

Budget performance in 2023

Budget

Authorized debit

Personnel ceiling

Bank of Israel

1,249,273

781,523

971.3

1,108,835

990,315

Managerial and assistance

308,283

41,756

377.4

278,825

257,194

Performance of the Bank’s functions

309,567

31,532

508.4

276,451

254,618

Pensions

330,244

135

 

300,508

279,543

Investments

68,134

93,486

 

45,371

44,515

Revenues

(9,531)

 

 

(8,281)

(7,693)

Reserve funds

31,297

135,680

12

18,506

 

Printing money

108,097

288,589

 

80,650

75,530

Managing the Citizens of Israel Fund

7,384

768

13

905

244

Credit Data Register

95,797

189,577

60.5

115,900

68,384

 

 

[1] The Supervisory Council is a body that supervises the Bank of Israel’s administrative activity, based on the Bank of Israel Law, 5770–2010.  The Council is comprised mostly of representatives of the public.

[2] In addition to the wage and pensions item.