Israeli budget hikes military spending, VAT, cuts social services

The Israeli government on Friday approved higher military spending and cuts in education, health and social services in a draft budget for 2025.

The draft, which still needs parliamentary approval, provides for a total expenditure of 744 billion shekels ($197 billion), according to the Israeli business newspaper Calcalist.

It also allocates 161 billion shekels to service debts.

The military is to receive 117 billion shekels as Israel fights on several fronts, an increase of 20 billion shekels compared to the current year.

Aside from the cuts, the budget also raises value-added tax from 17% to 18%, in a bid to close a budget gap of around 40 billion shekels, Calcalist reported.

The target for the budget deficit was set at 4.3% of gross domestic product. It is currently 8.5%.

The war is putting enormous pressure on Israel’s economy, and a 2024 growth forecast has already been slashed from 1.1% to 0.4%.