International Monetary Fund: Judicial reforms pose risk to Israel’s economy

The International Monetary Fund (IMF) warned that the Israeli government’s controversial judicial reforms and continued uncertainty about them pose a risk to the nation’s economy. 

Israel’s economy has already suffered in the past four months since the government announced its judicial reforms, with billions of pounds reportedly being withdrawn from Israel over fears that the country was turning into an illiberal democracy without an independent judicial system.

The reforms, however, were put on pause to allow for negotiations between the government and opposition, after hundreds of thousands of demonstrators took to the streets to demonstrate against the reforms.

Top economists, Bank of Israel and the high-tech sector have all warned in recent months that the reforms, which would politicise the Supreme Court and allow for a simple majority in parliament to override the court’s decisions (“override clause”, would significantly damage Israel’s economy.

“Absent the emergence of a durable and politically sustainable solution, continued uncertainty could significantly increase the price of risk in the economy, tightening financial conditions and hindering investment and consumption, with potential repercussions for growth, also in the longer term,” the IMF said in a statement.

“As in any country, maintaining strength of the rule of law would be important for economic success.”

The IMF advised Israel to reduce the uncertainty over its judicial system’s future with a “politically sustainable solution that is clearly communicated and well understood both domestically and abroad.”

Prime Minister Netanyahu has backed down from some of the core elements of the reform, such as the “override clause”, admitting it was unlikely to be included.

Other senior officials in the government, including Justice Minister Yariv Levin, have however insisted that the reforms pass in their full form.

Negotiations between the government and opposition parties Yesh Atid and National Unity party are ongoing, mediated by President Herzog. The remaining opposition parties have however either left completely or not engaged at all since they began.