Israel’s far-right government passed its budget for the fiscal year 2025 on July 3, 2024. Their stated objectives include lowering the overall budget deficit to no more than 4.9 percent of the Gross Domestic Product (GDP). The new budget marks total spending at $169.19 billion. It pours billions into military, police, prisons, social services, and schools. The architects of this fiscal plan, headed by Finance Minister Bezalel Smotrich, are now tasked with guiding Israel through the worst economic crisis since the Great Depression.
Last fiscal year, Israel ran a 6.9 percent of GDP budget deficit. This pushed major credit-rating agencies to downgrade the country’s credit rating. This new budget seeks to reassure investors and citizens alike by reducing the deficit and bringing the economy back into balance.
Strategic Financial Planning
The 2025 budget calls for robust funding in a number of critical areas to cement Israel’s qualitative military edge and security. With significant provisions for military, law enforcement, social welfare, and education spending, the government aims to fortify its national and social infrastructure.
For instance, the government is using those billions to build hundreds of new religious seminaries. This decision comes on the heels of ultra-Orthodox parties’ demands for greater exemptions for Jewish seminary students from military service. This allocation is a sign of the current political tussles inside Israel’s fractious coalition government.
"Netanyahu probably already had the votes he needed … However, Ben-Gvir’s support following the strikes ensures the budget will go through," said Flashenberg.
Addressing the Deficit
The budget's primary focus is on reducing the deficit from the previous year's high of 6.9 percent of GDP. Israel, meanwhile, is adopting a stricter deficit target of 4.9 percent for 2025. This significant step is intended to ensure that the country can restore its financial credibility in the international arena.
Recall that agencies downgraded the U.S. credit rating in part due to the prior large deficit. This move signals a clear need for strict fiscal accountability. In short, the government’s approach demonstrates a deep understanding of the need to be fiscally responsible, while recognizing competing domestic priorities.
Political Dynamics and Public Sentiment
Against this backdrop of political to-ing and fro-ing and civil outrage, today’s budget announcement is set. The addition of billions to religious seminaries became a flashpoint, exposing the chasm between the haredim and other elements of Israeli society.
"There’s a lot of anger … people fighting… against the government and what it’s saying," noted Goldberg.
Prime Minister Netanyahu’s administration was already under fire at home and abroad. Regardless of these signals, Netanyahu is determined to lead Israel down the same political path.
“In America and in Israel, when a strong right wing leader wins an election, the leftist Deep State weaponizes the justice system to thwart the people’s will. They won’t win in either place! We stand strong together,” asserted Netanyahu.
Moving Forward
Israel’s new budget prioritizes cutting the deficit and redistributing funds within sectors such as health and education. This strategy serves to stabilize its economy and undercut booming internal political pressures.
