Israeli Finance Minister Outlines 2025 Budget Amid War Costs
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Israeli Finance Minister Plans Budget Cuts for 2025
Israeli Finance Minister Bezalel Smotrich has announced significant spending cuts in the upcoming 2025 state budget. This decision comes as the government balances the need for fiscal responsibility with the financial demands of the ongoing conflict with Hamas in Gaza.
Context of Budget Cuts
Amidst rising pressures from the Bank of Israel and various investors for clarity on the country's fiscal policies, Smotrich has acknowledged the necessity of spending cuts and potential tax hikes. However, he contends that increasing taxes during wartime is not a prudent approach. In a recent news conference, he emphasized essential focus areas for the budget, with a cabinet vote scheduled soon.
Financial Implications of War
The ongoing conflict, described as the longest and most costly in Israel's history, incurs expenses estimated between 200 and 250 billion shekels. Smotrich firmly stated, "We are not limiting war spending and we will support the war effort until victory." He underscored that victory is paramount for future security and economic stability.
Details of the 2025 Budget
To fund the military engagement, the Finance Minister has proposed broad cuts amounting to 35 billion shekels for 2025. This plan includes a freeze on tax rates, benefits, and wages. He anticipates a budget deficit of 4% of GDP, a decrease from the anticipated 6.6% in 2024. Despite an alarming deficit of 8.1% in July, Smotrich remains optimistic about returning to targeted figures by year-end.
Economic Stability and Growth
Despite criticism regarding economic management amid stagnant growth, the finance minister pointed out that the shekel has strengthened since the onset of the conflict, with the stock market performing well. Moreover, investments in high-tech industries have rebounded, resulting in a low unemployment rate of 2.8%.
Inflation Trends
Smotrich noted that the recent rise in inflation to 3.2% is likely temporary. He attributed it mainly to supply challenges arising from the ongoing war.
Comprehensive Economic Strategies
Accompanying the proposed budget will be a detailed economic plan aimed at fortifying the high-tech sector, enhancing public sector efficiency, combating tax evasion, and diversifying funding sources. By outlining these initiatives, the Israeli government aims to restore economic confidence and stability.
Frequently Asked Questions
What are the main objectives of the 2025 budget cuts?
The main objectives include balancing fiscal responsibility while financing the ongoing war with Hamas and addressing the anticipated budget deficit.
What is the expected budget deficit for 2025?
The expected budget deficit for 2025 is projected to be 4% of GDP, significantly lower than 6.6% targeted for 2024.
How is the shekel performing in the current economic climate?
The shekel is currently stronger compared to before the war began, providing some economic stability despite ongoing challenges.
What support will the budget provide for the high-tech sector?
The budget plan will include measures aimed at supporting the recovery and growth of the high-tech sector, which is crucial for the Israeli economy.
What impact has the ongoing war had on inflation?
The conflict has resulted in a temporary rise in inflation, primarily due to supply chain disruptions, but it is expected to stabilize in the near future.
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