Israeli lawmakers are set to give their final approval today, Wednesday, for the amended state budget for 2024, which adds tens of billions of shekels to finance the war in Gaza. The amended budget stipulates increased defense spending and compensation for families and businesses affected by the war, which has entered its fifth month. Knesset members are resuming discussions on the spending package amounting to 584 billion shekels (160 billion dollars), or 724 billion including debt repayment costs. The plan also includes increased allocations for health, education, police, and social welfare.
The budget requires three rounds of voting to become law. The Knesset gave its preliminary approval a month ago, and the second and third rounds are expected to take place today, Wednesday, or as early as Thursday, depending on the time taken for the discussion. The budget anticipates a deficit of 6.6 percent of GDP in 2024, compared to a pre-war level of 2.25 percent. The deficit rose to 5.6 percent year-on-year in February, up from 4.8 percent in January.
Last year, Israel approved a budget for 2023 and 2024, but the Gaza war caused a disruption in the government's public finances leading to a budget revision and added expenditures. Budget discussions have become politically charged, particularly regarding the payments agreed upon by Prime Minister Benjamin Netanyahu under the so-called coalition agreement in 2022 with Finance Minister Bezalel Smotrich and leaders of other religious parties.
Despite calls from the central bank and opposition lawmakers to reduce non-war-related spending, most of the so-called coalition funds have been allocated. However, amendments will include some tax increases this year on cigarettes, tobacco products, and bank profits. Last month, Moody's downgraded Israel's credit rating to (A2), indicating the political and financial risks the country faces due to the war, marking the first time Israel's rating has been downgraded.
