The Israeli budget for 2025 reflects a dual focus on military preparedness amid ongoing conflicts and the need to manage economic challenges, including a significant budget deficit.
The reliance on increased taxation and cuts in public spending to finance military operations raises questions about the long-term sustainability of Israel's economic policies and their impact on citizens.
The limited cuts to government ministries and the shift in financial burdens onto the working public indicate a potential disconnect between government priorities and the needs of average citizens.
Given the current trajectory of military spending and economic pressures, further adjustments to the budget may be necessary before parliamentary approval in January.
If the budget is not approved by March 31, 2025, it could trigger new elections, potentially reshaping the political landscape in Israel.
The ongoing economic strain and public dissatisfaction may lead to increased protests and calls for reform from various sectors of society.
The Israeli government has approved a comprehensive budget for 2025, amounting to approximately NIS 607.4 billion ($199.23 billion). This budget includes significant allocations for military spending in light of ongoing conflicts in Gaza and Lebanon, with defense expenditures projected to reach about NIS 117 billion ($27.5 billion). Finance Minister Bezalel Smotrich emphasized that the primary aim of the budget is to maintain national security while supporting the economy, despite the challenges posed by the war and a sluggish economic environment.
To address a budget deficit currently standing at 8.5% of GDP, the government has proposed a series of tax increases and spending cuts totaling around NIS 40 billion ($10.66 billion). These measures include a rise in National Insurance payments, which is expected to impact the working public significantly, potentially costing the average family about NIS 7,000 annually. The government has also backed away from proposed cuts to minimum wage and National Insurance benefits, but the financial burden has shifted to increased social security payments.
Critics, including former Prime Minister Yair Lapid, have condemned the budget, predicting that it will increase the financial strain on Israeli families. The budget's limited adjustments to government ministries, with only five slated for closure instead of the initially proposed ten, have also drawn criticism for lacking substantial reform. Economists warn that without more effective measures to stimulate growth and equity, the budget could lead to further downgrades in Israel's credit rating.
