Israel unveils 2025 budget plan with spending cuts amid Gaza war costs

Jerusalem, Sep 4
Israeli Finance Minister Bezalel Smotrich unveiled the government's 2025 budget plan, detailing substantial spending cuts as Israel grapples with aggravated Gaza war-related costs.

The plan, which is expected to gain approval by the end of the year, aims to lower the deficit to 4 per cent of gross domestic product (GDP) in 2025, down from 6.6 per cent in 2024, reports Xinhua news agency.

Israel's deficit climbed to 8.1 per cent of GDP for the 12 months from August 2023 to July 2024, driven by heavy costs from ongoing military operations in Gaza that began last October.

Smotrich on Tuesday noted that the conflict, nearing its 11th month, has cost Israel an estimated 200-250 billion shekels (around $54-68 billion), making it "the longest and most expensive war in Israel's history."

The Finance Minister has faced pressure from the Bank of Israel and investors to clarify next year's fiscal policy. The central bank has suggested spending cuts, tax increases, or other revenue-raising measures, but Smotrich has argued that raising taxes during wartime is inappropriate.

To address the deficit, Smotrich's plan includes 35 billion shekels ($9.48 billion) in savings through measures such as freezing wages, tax rates, and social security benefits, alongside efficiency improvements in government ministries and the public sector.