Israeli parliament approves amended 2024 budget, prioritising funding for Gaza war

The Israeli parliament has approvedan amended 2024 state budget, allocating funds towards sustaining Israel's military campaign against Hamas in Gaza. This decision comes as the conflict with the Islamist Palestinian group extends into its sixth month.

The approved budget, totalling 584 billion shekels ($160 billion), signifies a substantial increase in defence spending and provisions for compensating households and businesses impacted by the conflict.

Finance Minister Bezalel Smotrich highlighted the objectives of the amended budget, emphasising its focus on securing victory in the war, bolstering reservist support, fortifying the home front, and fostering economic resilience amid challenging circumstances.

A crucial aspect of the amended budget entails a deficit revision, with the 2024 deficit projected to reach 6.6 per cent of gross domestic product (GDP), up from a pre-war level of 2.25 per cent.

The heightened deficit reflects the need to finance military operations and address the multifaceted repercussions of sustained conflict.

Despite the fiscal strain, the budget also allocates increased funding for essential sectors such as health, education, police, and welfare.

The budgetary adjustments are an indication of the profound impact of the Gaza war on Israel's fiscal framework, necessitating swift modifications and augmented spending commitments.

An infusion of 70 billion shekels, including heavy allocations for military and civilian needs, indicates the government's need to address immediate security imperatives and societal exigencies aggravated by the prolonged conflict.

However, the budget approval process has not been devoid of political contention, particularly concerning allocations to religious institutions agreed upon under previous coalition agreements.

Opposition figures, including leader Yair Lapid, have criticised the budget as "sectarian" and "irresponsible," lamenting what they perceive as a neglect of ordinary citizens' interests in favour of political expediency.

Nonetheless, the coalition government has pressed forward with its budgetary agenda, aiming to navigate the complex economic and political landscape.

The budget's passage comes against the backdrop of heightened fiscal scrutiny, with credit rating agency Moody's downgrading Israel's credit rating to A2 last month.

Moody's cited significant political and fiscal risks stemming from the prolonged conflict as pivotal factors contributing to the downgrade, highlighting the unprecedented challenges confronting Israel's economic stability in the wake of sustained hostilities.

(With inputs from Reuters)