In press statements, Yaron estimated that the weakness of the shekel, which has depreciated 10 percent since the start of the year, has led to excessive inflation.
The uncertainty could entail significant economic costs in the short term, the official warned.
He also criticized the changes proposed by Prime Minister Benjamin Netanyahu, noting the need to preserve “the strength and independence of institutions.”
The bill is highly controversial here, as it would limit the Supreme Court’s ability to overturn laws by giving Parliament the power to re-enact regulations contested by that body.
In addition, it would allow the far-right executive branch to control the appointment of judges.
Yaron warned that the legal and institutional changes could increase the country’s risk premium and further depreciate the currency, which in turn would negatively impact exports and a fall in domestic investment and private consumer demand.
Last March, rating agency Moody’s stated that Israel faces long-term economic risk as a result of judicial reform.
“If fully implemented, the proposed changes could significantly weaken the strength of the judiciary and therefore have a negative impact on creditworthiness,” the institution said.
In addition, they could also pose long-term risks to the economic outlook, particularly through capital inflows into the important high-tech sector, he stressed.
Numerous economists have repeatedly criticized Netanyahu’s idea and referred to its negative effects.
“The reform of the judicial system endangers the Israeli economy and can lead to a deterioration in Israel’s creditworthiness, cause investors to flee and brain drain,” warned more than 300 experts in January, including Nobel laureate Eric Maskin.
In February, more than 50 leading US university economists, including 11 Nobel laureates, criticized the plan in another public letter.
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