Today, Monday, the Israeli government posted two seemingly contradictory pieces of monetary news.

On the positive side, foreign currency reserves have passed the US$44 billion mark, a target long picked out by the Bank of Israel. Part of the latest jump resulted from an oversubscribed bond issue in Luxembourg, again another vote of confidence from overseas institutions in the Israeli financial markets.

Now switch over to government spending. Ouch! 

As in many countries, tax revenues are down and lower than initially predicted. The shortfall for 2009 could run close to 5% of GDP. As for expenditure, March was particularly bad. Large debt repayments became due and new unemployment expenditures have begun to kick in. 

What next? Today’s newspapers are full of leaks about forthcoming budgetary cuts, although many – eg reducing holidays – look like accounting fixes. The ship is not sinking, but the captain will need a firm and experienced set of hands to guide it through.