The government recently raised its deficit target from 3% of GDP to 4.9%, but even that may not be enough, hinted finance minister director-general Ohad Marani today.

Speaking with TheMarker on Wednesday, Marani admitted that tax revenues has been even slower than recently projected. Income from tax may be a billion shekels shorter than the most recent calculation, he said, but the government is on top of the situation and will defer spending to close the gap.

The disappointing tax revenues are likely to increase the government's deficit beyond its updated target of 4.9% of GDP.

However, Marani said he has set up a panel headed by himself to keep an eye on government spending.

"If it transpires that under the circumstances, the deficit target for 2002 cannot be met, the government is determined to postpone spending from the current fiscal year to the next one," Marani said.

Spending plans already approved by government would not be cut, but deferred, he clarified. He said the government is committed to ending the year within its deficit framework, to prove its credibility to the international rating agencies, and to prevent nervousness on the local capital market.

On the central bank lending rate, Marani recommended avoidance of extreme steps. "We all learned the lessons of the Bank of Israel action at the end of 2001," he said, referring to a sudden 2% rate cut, which turned out to be "fundamentally misguided", as Marani put it.

Israel's economic condition is highly fragile, Marani said. "The public could view fiscal or monetary mismanagement, or a failure to pass the budget and fulfill the goals of the economic plan, as a loss of control by the government over the economy. That could create a public mood of financial crisis," he said, and called on the government's coalition members to push the budget proposal through parliament.

Failure to pass the budget as is could lead the international rating agencies to downgrade Israel, Marani warned. "I don't even want to think of the repercussions of a downgrade on the Israeli marketplace," he said.