The government intends to make a NIS 35 billion cut in the 2025 budget, which will in part be funded by a freeze of the expected increase of stipends provided by Israel’s National Insurance Institute (NII) Finance Minister Bezalel Smotrich said during a presentation of the budget in a press conference at Israel’s finance ministry in Jerusalem on Tuesday.
NII stipends are normally paired to the Consumer Price Index (CPI), but in 2025 the stipend will remain the same despite expected rising of the CPI, leading to a nominal cut of an estimated 3% in monthly payments to Israel’s weakest citizens, including single parents, Holocaust survivors, and others. In parallel, increase in salaries of government officials and of Members of Knesset will also be frozen, Smotrich said.
The finance minister presented what he deemed the “central principles and budget framework,” and did not lay out expected budgets in specific ministries. The finance minister said that he expects the budget to pass in the government by the beginning of October, pass its first reading in the Knesset by mid-November, and pass into law by the end of December.
Budget goals for 2025
According to Smotrich, the budget deficit goal for 2025 will be 4% as opposed to the goal of 6.6% by the end of 2024. The budget deficit in the 12 months preceding August was 8.1%, but Smotrich said that barring any “major development” in the ongoing war that will increase war spending, the deficit will recede to the goal of 6.6% by the end of the year.
In order to reach the 4% goal of 2025, the budget will include an approximately NIS 35 billion shekel cut. According to Smotrich, the first ones to have their budgets cut will be the public sector. It will apply equally to all government ministries, and cuts will also be made to statutory government funded bodies, such as the NII.
Smotrich cited a number of indicators showing that Israel’s economy has remained strong. These include a strengthening of the shekel compared to the exchange rate at the beginning of the war, that Israel’s major stock indices were selling at a two-year high, a NIS 23 billion increase in tax income compared to the original forecast for 2024, and the low unemployment rate.
Smotrich added that he would continue broad government civilian expenditures related to the war, such as benefits for reservists, rehabilitation of the Gaza border area, compensation for businesses affected by the war, and more. He also said that the budget “growth-supporting systemic changes” in the hi-tech sector, public sector efficiency, and a fight against tax evasion, which he claimed based on Tax Authority estimations could eventually provide additional NIS 100 billion in national income annually.
In response to a question about coalition funds, which are budget funds earmarked for political agreements, Smotrich said that he hoped there would be “as little as possible” but that the determining factor would be whether they are “good funds” or “bad funds.”
Smotrich was asked about his remarks on government efficiency, including shutting down some of the 33 government ministries, based on a proposal by the finance ministry’s budget department proposal. He responded that many of these ministries had “negligible” budgets and that whether or not they are shut down will not matter in the big picture.
The coalition agreements signed in late 2022 include a provision that Smotrich will be replaced by Shas’s Aryeh Deri at the end of 2024 as finance minister. Deri has since been barred from serving as a minister due to past criminal convictions. Asked about whether he would be replaced by a different member of Shas, Smotrich answered that while “agreements must be kept,” the coalition agreement could change, and therefore the public should “wait and see.”
Comments are closed.