Israel's 2025 Wartime Budget: Balancing Security and Economy

The Israeli cabinet is voting on a 2025 wartime budget to address military spending from ongoing conflicts. The budget imposes austerity measures, raising taxes and cutting spending to manage the deficit. The economy is struggling due to war impacts, necessitating a focus on both security and fiscal stability.

Israeli cabinet ministers are poised to vote on a highly anticipated wartime budget for 2025, aiming to curb spending and increase taxes to fund military endeavors necessitated by ongoing conflicts. The financial burden of wars in Gaza and Lebanon has strained Israel's budget through hefty defense expenses, including equipment and manpower due to mass reserve duty recalls and compensation for those affected.

Prime Minister Benjamin Netanyahu, speaking at the cabinet meeting preceding the vote, highlighted the intricate balance between economic restraint and security needs. "Our security also depends on the economy," he emphasized, addressing the necessity of fiscal sacrifices for robust defense funding. "There is no economy without restrictions. If you give to one place, you unfortunately need to take from another," he asserted, acknowledging the trade-offs inherent in the budget plan.

Since the Oct. 7, 2023 attack by Palestinian Hamas militants, Israel's economy has shown zero growth, with supply-related inflation exacerbating the cost of living. The ongoing conflict has led major credit agencies to downgrade Israel's credit rating, spiking financing costs, while persistent 3% inflation has compelled the central bank to maintain elevated interest rates. Finance Minister Bezalel Smotrich noted that the military budget will not be limitless, but 102 billion shekels are allocated for 2025, within a total budgetary framework of 744 billion shekels. Following cabinet approval, the budget will advance to a parliamentary vote, with final ratification expected by January.

(With inputs from agencies.)