Israeli parliament OKs 2023-24 state budget in preliminary vote

Israel's parliament gave initial approval to the state's 2023-2024 budget on Monday in a key test of the governing coalition amid a battle over the government's flagship judicial overhaul plans.

Israel's parliament gave initial approval to the state's 2023-2024 budget on Monday in a key test of the governing coalition amid a battle over the government's flagship judicial overhaul plans. The cabinet last month approved the budget draft that the Finance Ministry expects will be fully ratified by the end of May. The budget allocates spending of 484.8 billion shekels ($136 billion) this year and 513.7 billion next year.

The budget next heads to parliament's finance committee, where it typically undergoes changes before final votes in the full plenum. Lawmakers voted 62-52 in favour of the spending package, just after an announcement that Prime Minister Benjamin Netanyahu was delaying the discussions on his legal system overhaul.

Netanyahu sacked his defence minister on Sunday for opposing moving forward on the plan at the current time, setting off mass protests and rifts within his own Likud party and other coalition partners. "We are bringing significant structural reforms that will accelerate economic growth, along with a significant budget investment, a response to security needs ... and wage requirements, while proportionately restraining spending," said Finance Minister Bezalel Smotrich before the vote.

The ministry has set budget deficits of 0.9% in 2023 and 0.8% of gross domestic product in 2024, up from a 0.6% surplus in 2022. Israel's economy is set to grow around 3% this year from a 6.4% spurt in 2022, while inflation remains above a 5% rate despite aggressive interest rate increases.

"The budget will allow the government to implement its policy, while maintaining fiscal responsibility that will help stabilize the economy and prevent the worsening of inflation," Smotrich said. "Approving the budget is a critical step - it conveys to the public, rating companies and investors that Israel is acting responsibly and will help ensure stability."

Rating agencies have warned that the judicial reforms could pressure Israel's sovereign credit ratings. (Editing by Emily Rose and Sharon Singleton)