Smotrich says war costing $54-68 billion; presents 2025 budget plan, including steps to deal with $9.5b fiscal gap
Sharon Wrobel is a tech reporter for The Times of Israel.
Finance Minister Bezalel Smotrich presents a state budget plan for 2025 with a deficit target of 4 percent of gross domestic product, which will necessitate NIS 35 billion ($9.5 billion) in fiscal adjustments.
“We are in the longest and most expensive war in Israel’s history with about NIS 200-250 billion ($54-68 billion) in direct costs,” says Smotrich at a press conference in Jerusalem. “This war began with a huge crisis between the state and its citizens and we had to rebuild trust.”
“The decisions we made for an expansionary economic policy during the war were the right ones, which kept the society and the national resilience alive, and kept the economy going as well,” he argues.
The Finance Ministry’s deficit ceiling is in line with the recommendation by the Bank of Israel. For this year, the government had to raise the 2024 budget deficit target to 6.6% of GDP from a planned 2.25% approved before the war, due to higher defense spending as a result of the war with Hamas. Israel posted a budget deficit of 4.2% in 2023.
To meet the budget deficit target set for 2025, Smotrich cites several spending and tax measures to deal with the fiscal hole of NIS 35 billion. Among the measures is the freezing of planned tax changes and benefits. They include merging the two lowest income tax brackets of 10% and 14%. The step would affect the low-earning working population that currently pays a minimum rate of 10% and would be taxed according to the 14% income bracket. Other measures that are being proposed are a freeze on salaries of public sector pay.
