Netanyahu, Smotrich say they’ve agreed to pass 2025 state budget by year’s end
The two make the announcement after meeting without top Treasury officials who oversee the matter
Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich said Sunday they had agreed to seek to pass the 2025 state budget by the end of the year, according to a statement from the premier’s office.
“Discussions were held regarding the budget framework, with a goal of supporting the war effort on the front lines and the home front in order to push the economy forward,” it said, adding that the two agreed the budget would pass by the end of 2024.
The two met to discuss the budget without top Treasury officials who oversee the matter.
In the wake of credit rating cuts by the Fitch, S&P and Moody’s agencies, Smotrich is under pressure to maintain fiscal responsibility at a time when the budget deficit has swelled due to Israel’s war against Hamas in the Gaza Strip.
Spending on the war has topped NIS 80 billion ($22 billion) and investors are watching to see if Smotrich has the political will in the coalition of right-wing and religious parties to make big fiscal adjustments.
Last month, Yogev Gradus, director-general of the Budget Department at Finance Ministry, warned that it was “bordering on unreasonable that we are in July without there being in-depth budgetary discussions” for next year.
Speaking during a conference at Reichman University, Gradus said Israel faced “great challenges” and the budget “cannot be done in a month or two.”
The Finance Ministry has been preparing for a series of spending cuts and tax hikes to make NIS 25 billion ($6.6 billion) in fiscal adjustments to next year’s budget that have become necessary due to war costs, as the discussions with the government on the 2025 state finances have stalled.
Faced with credit ratings downgrades and as the state deficit this year continues to widen amid growing military and civilian spending, with Israel’s war against Hamas in the Gaza Strip in its 11th month, the government has come under increased pressure to maintain fiscal responsibility and credibility.
The government is expected to be bogged down in rifts over the approval of politically tough spending cuts and tax hikes necessary to deal with a fiscal hole in 2025 of an estimated NIS 30 billion ($8 billion).
Meanwhile, Finance Ministry officials have been working on a package of spending cuts and tax measures without the political echelon to help tackle the fiscal shortfall.
The state budget for 2025 was sought to be approved by the Knesset by the end of this year so the austerity measures to help reduce the deficit and fund war expenditures can come into effect in January. Failure to pass the budget by March 31 of a given year will result in the dissolution of the government and a snap election.
Economists have been warning in recent weeks that a repeated postponement or delay in the drafting and passage of the 2025 budget will undermine Israel’s fiscal credibility and is likely to lead to further downgrades by credit rating agencies and fuel uncertainty among investors.
Sharon Wrobel contributed to this report.
