Israel parliament set to approve amended 2024 budget to fund Gaza war

Israeli lawmakers were set to give their final approval on Wednesday to an amended 2024 state budget that adds tens of billions of shekels to fund the occupation state’s military offensive against the Palestinians in the Gaza Strip, Reuters has reported. The amended budget envisages more spending on defence and compensation to households and businesses damaged by the offensive, which is now approaching its 160th day.

Members of the Knesset (parliament) have resumed debate on the spending package of 584 billion shekels ($160bn), or 724bn including debt repayment. The plan also includes higher allocations for health, education, police and welfare.

The budget requires three rounds of voting to become law. The Knesset gave its initial approval a month ago and the second and third rounds are expected on Wednesday or early on Thursday, depending on the length of the debate, which is often rowdy.

The budget envisages a deficit of 6.6 per cent of gross domestic product (GDP) in 2024, revised from a pre-war level of 2.25 per cent. In February, the deficit rose to 5.6 per cent over the previous 12 months from 4.8 per cent in January.

Israel last year approved a two-year budget for 2023 and 2024, but the Gaza war has shaken up government finances, requiring budget changes and additional spending.

The budget has become politically charged, in particular over payments agreed by Prime Minister Benjamin Netanyahu under a 2022 coalition accord with far-right Finance Minister Bezalel Smotrich and the heads of right-wing religious parties.

Despite calls by the Central Bank and opposition lawmakers to cut spending not related to the war, most of the so-called coalition funds will still be allocated. However, there will be some tax hikes this year on cigarettes and tobacco products, as well as on bank profits.

Moody’s last month downgraded Israel’s credit rating to A2, citing material political and fiscal risks for the country stemming from the war. It was the first time that Israel’s rating has ever been cut.

(Source: MEMO)