The Israeli government agreed today, Monday, after strenuous attempts, to amend the state’s general budget for the year 2024, raising it to 582 billion shekels ($156 billion), an increase of 70 billion shekels ($19 billion) over the original budget, taking into account the increase in expenditures on defense operations. As a result of the ongoing war on the Gaza Strip.
Thus, the budget deficit is expected to expand to 6.6% of GDP.
The Ministry of Finance was forced to make concessions before approving the budget, as ministers opposed the cuts and threatened not to support the budget in last night’s cabinet session, and this morning they obtained concessions in personal meetings with Prime Minister Benjamin Netanyahu.
The main conflict today was over cuts in the budgets of various ministries after the Ministry of Finance announced a comprehensive reduction of 3%, which was raised at the last minute to 5%.
Netanyahu and his Finance Minister, Bezalel Smotrich, sought not to undermine the stability of the coalition, and were content with minor amendments in these areas.
In the budget amendment negotiations, National Security Minister Itamar Ben Gvir had the most difficulty, as he insisted that his ministry not be included in the comprehensive reduction.
Ben Gvir issued a press statement in which he said, “An additional increase in the police budget will be granted in the amount of 2.275 billion shekels.” He added, “The planned reduction in the ministry and the police, which totals 469 million shekels, will be cancelled.”
Losers and winners
Once the issues with Ben Gvir were resolved, the main obstacle to budget approval was overcome. The budget vote was scheduled for one o’clock in the afternoon to focus the minds of the ministers who were still objecting.
The Ministry of Health was also able to cancel the planned reduction of more than 300 million shekels and even obtain a budget increase of about 1 billion shekels.
Agriculture Minister Avi Dichter agreed to reduce his ministry’s allocations and reduce the number of jobs he will have to cut.
As for Education Minister Yoav Kisch, who angrily withdrew from the cabinet session last night in protest against the cuts planned for his ministry, he was satisfied with limited reductions from the budget allocations for his ministry.
As for taxes, the amended budget approved an increase in the tax on bank profits for the years 2024 and 2025 from 17% to 26%.
The Governor of the Bank of Israel, Amir Yaron, expressed his concerns about irresponsible financial behavior, stressing the basic health of the Israeli economy.
Yaron emphasized, “The Israeli economy is fundamentally sound, and has the characteristics required to flourish when the war ends as well. But this will not happen automatically. It is important to remember that economic growth depends first and foremost on a stable economy and investor confidence.”
Since the Israeli war on the Gaza Strip, Israel’s economy has suffered a gradual recession, as sectors have suffered from almost complete paralysis, and activity in other sectors has continued at a minimum, amid a blackout from the official authorities regarding the results of the last quarter of 2023.
The governor stressed the crucial role of government policy in overcoming current challenges while maintaining fiscal responsibility, noting that it will be crucial to the economy’s ability to recover from the effects of war and quickly return to growth.