Al Jazeera’s correspondent in Jerusalem reported that Israeli Finance Minister Bezalel Smotrich presented his plan for the 2025 budget, in which he estimated the cost of the war at more than $68 billion.
Sources said Smotrich’s 2025 budget plan included $35 billion in cuts.
Discussions of the 2025 budget in Israel resumed after a two-month hiatus, as Smotrich held a meeting with senior officials in his ministry to discuss building the budget.
During the meeting, Smotrich announced his intention to present a budget based on a fiscal deficit of up to 4% of GDP, according to the Israeli economic newspaper Globes.
Some at the meeting wondered whether Smotrich had coordinated this goal with Prime Minister Benjamin Netanyahu, as there was talk in Netanyahu’s circles of an “easy” budget based on a much higher deficit.
To achieve the 4% of GDP deficit target, tough measures that can be implemented quickly will be necessary, Globes says.
The Finance Ministry is expected to struggle to introduce major and complex reforms given the limited time left to pass the budget, and will likely have to stick to traditional measures such as freezing income tax brackets, freezing public sector wages, freezing the minimum wage, imposing an additional tax on undistributed corporate profits, and eliminating the VAT exemption for tourists.
According to Globes sources, Smotrich and Finance Ministry officials will meet with Netanyahu later this week to decide on the budget framework and austerity measures needed to finance the costs of the war.
This meeting is expected to have a significant impact on the decisions of international credit rating agencies, which have not yet made any further downgrades to Israel’s rating.
Some government sources are raising doubts about Netanyahu’s intention to actually pass the budget, considering that the meetings may only be an attempt to spread stability and buy time until Netanyahu makes his decision on calling early elections.
