In a move that signals ongoing economic adjustments, the Israeli government has approved a second increase to the 2025 state budget deficit in less than a month. The revised deficit for next year’s budget has been set at 4.4%, up from the previously approved 4.3%, amounting to an additional 80 billion shekels. The decision to raise the deficit was almost unanimous, with the sole exception being Minister Gila Gamliel, who voiced her opposition.
The budgetary increase of 0.1% — roughly two billion shekels — is largely attributed to several concessions made by the Ministry of Finance. These include the reduction of the value of one convalescent day for employees instead of the two originally planned, the cancellation of a tax on training funds, and the abandonment of a proposed reduction in pension benefits. Additionally, Finance Minister Bezalel Smotrich has indicated plans to introduce tax benefits for various populations starting in 2025, further contributing to the rise in the deficit.
The overall state budget for 2025 is now projected at approximately 620 billion shekels. However, experts warn that the budget is likely to be breached by an additional 10-20 billion shekels due to recommendations from the "Nagel Committee" regarding the defense budget. These changes could push the deficit higher, with Ministry of Finance officials estimating that it may rise to 4.9% once the committee’s recommendations are fully implemented, deepening the budget gap by another 10 billion shekels.
Foreign Ministry Gets Boost
In a related budgetary development, the government has approved an additional 545 million shekels for the Ministry of Foreign Affairs, earmarked for an international outreach initiative. This funding, which was approved unanimously, comes at the request of new Foreign Minister Gideon Sa'ar. The budget increase was part of a broader agreement between the State Right faction and Likud, in which Sa’ar was granted responsibility for leading a global awareness campaign.
As part of the plan, Sa'ar will oversee an action plan aimed at improving Israel’s international image, focusing on public relations, social media campaigns, research activities, and organizing conferences and events. The strategy will also include outreach on global university campuses and engagement in political-legal activities, such as fostering international support for Israel's positions.
Sa’ar’s Leadership on International Outreach Campaign
Minister Sa'ar tasked the Foreign Ministry’s Director-General, Eden Bar-Tal, with formulating a comprehensive strategy and action plan to enhance Israel’s global presence. The plan will incorporate a variety of initiatives, including bringing delegations of public opinion leaders to Israel to strengthen international ties and improve Israel’s standing on the global stage.
The allocation of 545 million shekels for these outreach efforts reflects the government's commitment to boosting Israel’s diplomatic and public relations efforts worldwide, particularly amid ongoing international challenges.
Economic Pressures and Growing Fiscal Deficit
While the increase in foreign ministry funding underscores a significant policy shift, the growing budget deficit reflects broader economic challenges facing the Israeli government. The continued rise in the deficit, now exacerbated by the additional defense budget demands, suggests that Israel may face tough financial decisions in the year ahead. The government will need to balance its fiscal priorities, including social programs, defense needs, and international initiatives, against the growing strain on the national budget.
Economists warn that the escalating deficit, combined with potential defense-related spending increases, could result in long-term financial implications for Israel, including increased debt and the need for future fiscal adjustments. However, the government's focus on international outreach and strengthening diplomatic ties may also be seen as part of a broader strategy to secure Israel's position on the global stage amid shifting geopolitical dynamics.
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