Israeli Government Approves Second Breach of 2024 Budget, Increasing Spending by NIS 3.3 Billion

The Israeli government approved a significant breach of the 2024 budget today (Sunday), marking the second time the budget has been opened this year. The decision increases total government expenditure by NIS 3.3 billion.

Finance Minister Bezalel Smotrich announced the budget breach yesterday, despite the growing deficit and against recommendations from professional officials within his ministry. The government discussion on the matter proceeded without the presence of these officials or Prime Minister Benjamin Netanyahu, involving only seven ministers.

This unprecedented move in Israeli economic history, with the budget being breached twice within a year, has sparked controversy. Smotrich claimed that the decision "does not increase the deficit," but the professional staff within the Ministry of Finance disagreed. A senior official in the Treasury criticized the decision, stating, "Increasing spending increases the deficit, and any other statement is misleading the public."

The increased expenditure is reportedly intended to fund continued evacuations, expand aid programs for reservists, and implement recommendations from the public committee for the victims of the October 7 attacks.

As of last month, the government deficit stood at 8.1%, one of the highest levels on record, surpassing the 6.6% of GDP ceiling set in the budget. Despite this, Smotrich dismissed concerns, asserting that "Israel's economy is strong, and the indicators point to that."

However, recent data from the Central Bureau of Statistics revealed a decrease in GDP per capita, business output, and exports in the second quarter of the year. Additionally, three of the world's five largest investment banks have downgraded Israel's growth forecast for 2024, predicting growth rates between 0.8% and 1.3%, which reflects a decrease in per capita growth.