EXPLAINER

Israel’s new $15bn war budget: What’s it for and what gets cut?

The Israeli government approves an increase to its annual budget, but not without a lot of infighting.

After agreement by the cabinet, Israel’s new budget will now be moved to the Knesset for parliamentary approval [Ilan Rosenberg/Reuters]By Alasdair SoussiPublished On 16 Jan 202416 Jan 2024

Waging war is a costly business for any state – and raising the funds required to fight one can be laden with political controversy.

But when that state’s cabinet is volatile, mistrustful and deeply divided, then the stakes can be higher still.

Keep reading

list of 4 itemsend of list

Indeed, the 37th government of Israel has rarely enjoyed much harmony since it took office about a year ago. Three months into its war on Gaza, it was clear the funds assigned to the war efforts were not enough despite an emergency injection in December of nearly 30 billion shekels ($7.85bn), mostly funded through increased borrowing.

On Monday, Netanyahu’s cabinet approved an increased budget for 2024, which allocates an additional 55 billion shekels ($15bn) for the war as well as increased funding for other departments despite fraught deliberations that caused the education minister, Yoav Kisch, to storm out in a rage when proposals to cut funding to his department were put forward.

In the end, after an all-night meeting, Kisch’s concern was allayed when Prime Minister Benjamin Netanyahu announced an increase in the education budget as well as the health budget.

Why did Israel’s budget need to be amended?

The Israeli cabinet first met on Sunday to augment the two-year budget for 2023 and 2024, originally amounting to $270bn, which it had approved in May.

Netanyahu, who has become a deeply unpopular figure in Israeli society, began by stating the government’s budget aims.

“What is required now is, first of all, to cover the expenses of the war and to allow us to conduct the war in the coming year and complete it, including eliminating Hamas, returning our hostages and restoring security and the sense of security in both the north and the south so that the residents can return there,” he told his cabinet.

It’s one thing to make bold wartime declarations but quite another to pay for them, not least in the face of shocking statistics.

Israel’s war on Gaza – which has killed more than 24,000 Palestinians, with thousands more lost under the rubble and presumed dead, and has injured tens of thousands more – has cost the country about $269m each day since it began on October 7.

The Bank of Israel estimated that war-related costs for 2023 to 2025 could amount to $55.6bn.

This makes troubling reading for a country that, feeling the financial pinch that often comes with waging a war, posted a budget deficit of 4.2 percent of its gross domestic product (GDP) in 2023, compared with a 0.6 percent surplus the year before. As a result of this new budget, the deficit for 2024 has widened to 6.6 percent of Israel’s GDP.

What is in the amended budget?

The new, 582-billion-shekel ($155bn) budget for 2024 has been reached by cutting funding for government departments by an average of 3 percent and increasing spending by $18.6bn.

After the cabinet agreed on the budget, Netanyahu hailed the “increases to … the internal security budget, but most importantly, the defence budget, which is simply essential for victory and for our future”.

The fractious Israeli coalition government – which includes the political parties Likud, United Torah Judaism, Shas, Religious Zionism Party, Otzma Yehudit, Noam and National Unity – is the most right-wing in the country’s history.

However, National Unity, led by Netanyahu rival Benny Gantz, voted against Monday’s financial plan after its bid to push for more cuts, including from the $2.15bn pot given over to so-called coalition funding in 2022, was rejected.

These funds include money to fund the ongoing construction of Israeli settlements in Palestinian territories, which, despite being illegal under international law, continue to expand.

Yossi Mekelberg, an associate fellow with the Middle East and North Africa Programme at London’s Chatham House, told Al Jazeera that the coalition funding deal struck between Netanyahu and the ultra-Orthodox members of his government is still much-wanted by ministers.

“They still want the coalition agreement that allocates money to their causes,” Mekelberg said. In the end, this fund saw only a small cut of $663.5m.

What will the extra $15bn pay for?

The additional money will buy military hardware for starters as well as pay Israel’s 360,000 army reservists . Also included are funds to support the more than 100,000 Israelis evacuated from communities bordering Gaza and neighbouring Lebanon, where Israeli forces are clashing with Hezbollah, the Lebanese resistance group.

“We changed the priorities so that every reservist and every fighter and his family knows that there is a government that stands behind him and fully takes care of him,” Finance Minister Bezalel Smotrich said after the budget was approved.

As a country at war, safeguarding Israel’s internal security was a crucial consideration too.

The far-right national security minister, Itamar Ben-Gvir, who himself lives in an illegal settlement in Hebron in the occupied West Bank, had previously threatened to withdraw his support from any budget that stripped money away from his ministry.

Ben-Gvir is leader of the Otzma Yehudit, or Jewish Power, party, which espouses anti-Palestinian policies.

His department duly received an extra $534m in the new budget.

Could Israel run out of money for its war?

Funds probably will not dry up in the short term. Whatever the pressures on Israel’s finances as a result of its war on Gaza and raids on the West Bank, the Israeli state can likely rely on unwavering United States military and financial support.

In November, the US House of Representatives greenlit legislation to provide $14.5bn of military aid to Israel in addition to the $3.8bn given to the country each year. It has yet to pass the Senate.

Israel’s new budget also faces legislative scrutiny. It will now be referred to the Knesset, where three votes are required for it to become law.

In the longer term, and despite current strains on the country’s finances, Mekelberg said the “Israeli economy can recover – and recover relatively quickly” but only if Israel finds a way to end the war.

This will require real leadership, he added. With the war on Gaza now more than three months old, “people forget that the 10 months before the war was [already] a time of political instability and protest [in Israel],” Mekelberg said.

Source: Al Jazeera