Israel's 2025 Austerity Budget: Balancing War and Economy

The Israeli cabinet is voting on the 2025 wartime budget to curb spending and increase taxes to fund ongoing military conflicts in Gaza and Lebanon. Despite financial strain, including a credit rating cut, the government aims to stabilize the economy through austerity measures to lower the deficit.

As Israeli cabinet ministers gear up to vote on the wartime budget for 2025, the focus is squarely on reining in spending and imposing tax hikes to offset the hefty expenses incurred by conflicts in Gaza and Lebanon. The government intends to address the financial strains that have left a significant impact on Israel's economy.

Prime Minister Benjamin Netanyahu emphasized the crucial link between a strong military and a healthy economy, noting the rising inflation and zero economic growth following the October 2023 attack by Palestinian Hamas militants. With credit agencies having already downgraded Israel's rating, the proposed budget aims to reduce the current 8.5% GDP deficit.

Finance Minister Bezalel Smotrich outlined the austerity measures, including a value-added tax hike and restricted military budget. The goal, he said, is to maintain economic control and stability in the face of adversity. The cabinet's initial approval will move the budget to parliament, with a final vote expected by early 2025.

(With inputs from agencies.)