Israel’s parliamentary budget committee has passed the long-stalled 2025 state budget, paving the way for a final vote by legislators before the March 31 deadline to avoid the collapse of the government. The vote followed a heated 13-hour debate on Sunday, in which opposition legislators accused the government of a lack of transparency in its budget plans.
The overall budget is 756 billion shekels ($203.5 billion), or 620 billion shekels before debt servicing, a 21% increase on 2024 spending. Alone, the defense budget will break a record 110 billion shekels as Israel looks to increase military outlays after spending $31 billion on wars in Gaza and Lebanon in 2024. The deficit will stand at 4.9% of GDP, down from 6.8% in 2024 that had been pushing credit rating declines.
If the budget is not passed by March 31, there would be a snap election in automatic effect, but analysts claim the government won’t fall apart. Finance Minister Bezalel Smotrich initially set targeting the approval of the budget toward the end of 2024, but delay came due to internal conflicts in coalition partners.
It also contains tax rises, aimed at reducing the deficit and keeping public finances stable amidst continued military struggles. Critics are, however, saying that yet another tax increase might be in order. Oppposition member Vladimir Beliak cautioned that rating agencies are taking a close eye on the issue and that Israel might again get its credit reduced if economic policies do not strengthen.
Committee chairman Moshe Gafni justified the budget, saying, “We did everything we could to alleviate the tax burden while being fiscally responsible in a difficult period.” But Beliak labeled it “socially and morally disastrous.”
The timing of the final parliamentary vote is still unclear, but its result will be decisive for Israel’s economic future.
