Facing backlash, gov’t okays NIS 3.4 billion in new spending for evacuees, reservists
Smotrich insists proposed budget expansion won’t push deficit past the 6.6% of GDP target set for the year, after it widened last month to 8.1% due to war-related outlays
The cabinet on Sunday approved a proposed increase to the 2024 state budget pushed by Finance Minister Bezalel Smotrich, that will provide almost NIS 3.4 billion ($924 million) to help fund evacuated civilians and reserve soldiers until the end of the year amid the ongoing months-long war.
The measure faced significant backlash from officials in the Finance Ministry as well as opposition politicians, who rebuffed Smotrich’s assertion that the expansion would not push the budget deficit past the annual target of 6.6% of GDP set for the end of 2024.
Smotrich announced the plan late Saturday, saying in a statement that “contrary to reports, the increase in spending is being done without raising the deficit target,” which was expanded to 6.6% of GDP after the Hamas-led October 7 triggered the war in Gaza and border skirmishes with Lebanon’s Hezbollah, from the previous projected target of 2.25%.
According to Smotrich, the new expansion will add about NIS 2.2 billion in assistance for the continued support of some 80,000 Israelis who were evacuated from their homes along the borders with Gaza and Lebanon. Another NIS 200 million will be allocated to help fund reserve military service and NIS 193 million for salary agreements forged last moth for the extension of evacuee grants for the months of July and August, Smotrich said.
An additional NIS 255 million will go to grants for certain war-affected citizens. Smotrich said that NIS 525 million in funds drawn from a previous decision to make an across-the-board cut across ministries will be returned to the state coffers. As a result, the 2024 budget will be expanded by a total of NIS 3.4 billion, the Finance Ministry said.
According to Hebrew media reports, the increased spending will be offset by some cuts, which include NIS 100 million that were earmarked for urban renewal projects, NIS 84 million in cuts from funds to local authorities, and NIS 46 million from education programs.
The expansion was met with sgnificant backlash from officials within the Finance Ministry, while opposition politicians denounced the budget increase— the second such measure since the war broke out in October.
MK Vladimir Beliak of Yesh Atid wrote on X Sunday that Smotrich “does not know how to manage a budget and is trying to deceive the whole world,” accusing the finance minister and Prime Minister Benjamin Netanyahu of “bluffing and deceiving.”
Beliak said the budget increase will blow past the deficit target despite Smotrich’s protestations— and that doing so is avoidable, if the government would transfer funds from elsewhere in the budget.
“The government could have cut the coalition funds (about NIS 5 billion in total) or closed unnecessary offices (of which there are at least ten.)”
In July, the country’s fiscal deficit widened to 8.1% of GDP over the prior 12 months from 7.6% in June as war costs since the outbreak of the fighting triggered by the October 7 Hamas onslaught ballooned to NIS 88.4 billion, while government expenditure exceeded state revenue. Israel posted a budget deficit of 4.2% in 2023.
“Alternatively, as an option, we could tell the truth— we were wrong. We didn’t calculate the deficit correctly. It won’t be 6.6%— it’s already 8.1%, and we’re now forced to increase it by another 0.2%,” Bialik remarked.
Earlier this month, the Finance Ministry said it expects spending to continue to increase until the end of September, citing increased expenditures on the war. From the fourth quarter, the deficit is projected to be on a downward trend and converge to the target of 6.6% by the end of 2024, subject to unexpected war developments, the ministry said.
In August, credit ratings agency Fitch downgraded Israel’s credit rating from A+ to A, citing worsening geopolitical risks as it expects the months-long Hamas war in Gaza to last well into 2025. The ratings agency maintained a negative outlook on the economy, opening the door for further downgrades as the cost of the continued fighting weigh on public finances.
The military call-up of tens of thousands of reservists who joined the fighting, and the displacement of residents and families from southern and northern communities have been causing disruptions in the country’s workforce and the day-to-day operations of businesses.
The October massacre on October 7 of last year saw Hamas terrorists rampage through southern Israel and kill some 1,200 people, mostly civilians, and kidnap 251, starting the ongoing war.
Alongside the fighting in Gaza, Iran-backed Hamas ally Hezbollah has launched daily barrages of rockets into northern Israel for the past 10 months, trading fire with Israeli forces and fueling fears that the Lebanese terror group’s attacks could escalate into a full-blown war.
As Israel remains braced for threatened attacks by Iran and Hezbollah, and the duration and extent of the war with Hamas uncertain, the government could face billions of shekels in additional military and civilian spending in the coming months, including for army reservists and the evacuation of hundreds of thousands of residents from the south and north of the country and their relocation to hotels.
