Israeli Treasury Blocks IDF Funding Increase Amid Postwar Budget Dispute

What's Happening?

Following the conclusion of military operations in Gaza, the Israeli Finance Ministry has decided against increasing the defense budget, despite the Israel Defense Forces (IDF) requesting an additional 20 billion shekels for 2025. The decision comes after the Knesset had previously approved a 30 billion shekel supplement for defense, which included humanitarian aid to Gaza. This expansion led to budget cuts across various ministries, including education, health, and welfare. The Treasury argues that the end of the Gaza conflict and the cancellation of a planned ground offensive negate the need for further defense spending. The Nagel Committee had recommended a defense budget of 123 billion shekels for 2025, but it has already grown to 163 billion shekels, causing a fiscal strain.

Why It's Important?

The Treasury's decision to block additional funding for the IDF is significant as it reflects a shift in priorities following the Gaza conflict. This move could potentially redirect funds to other critical areas such as education, healthcare, and infrastructure, which have faced cuts due to increased defense spending. The fiscal deficit has risen to 5.2 percent, impacting families and businesses, and leading to boycotts against Israeli firms abroad. The Treasury's stance highlights the economic challenges faced by Israel in balancing defense needs with broader societal and economic requirements. The decision could also influence future defense policies and budget allocations.

What's Next?

With the ceasefire in place, the Treasury aims to restore funding to essential services and infrastructure projects. This includes preventing further cuts to welfare and healthcare and reviving postponed road and rail projects. The government may consider rolling back planned tax increases and recent hikes to health and social insurance contributions. The economic outlook suggests growth could resume by 2026, potentially narrowing the deficit. Political dynamics, especially in an election year, may also play a role in shaping budgetary decisions, as providing benefits could be more favorable than implementing cuts.