Prime Minister Benjamin Netanyahu’s fascist cabinet has approved a 2025 budget that includes some of the biggest spending cuts and tax increases to finance the war that Israel has ever seen.

With this war, already the longest and costliest Israel has ever fought, and now spreading to Lebanon and Iran, the proposed tax hikes and spending cuts will likely deepen before that the Knesset approves the budget in three months.

According to the Ministry of Finance, at the end of last September, the direct cost of the war reached 29 billion dollars. Since then, it has increased considerably with the assault on Lebanon, the more intense fighting in Gaza and the strikes against Iran. Tens of thousands of reservists have been mobilized and ammunition is being depleted at a rapid rate. Daily costs rose from $110 million to $135 million, a sum that would build a dozen much-needed schools.

Rating agencies have lowered Israel’s credit rating, while foreign investors have reduced their exposure to Israeli debt. The economy, which has still not recovered from the collapse suffered in the first months of the war, when some 350,000 reservists were mobilized, is now smaller than it was on October 7, 2023. Israel’s vaunted high-tech sector is in trouble. Intel Israel to lay off hundreds of workers. Investments in factories and equipment are declining. The travel and tourism industry is at a standstill as flights are canceled due to the war.

Last month, following the Iranian missile attack, Chevron, which operates Israel’s Leviathan gas field, announced it was suspending work on a $429 million expansion project due to the “situation.” safe.” Further Israeli attacks on Iran, particularly its oil facilities, could trigger a much larger war, creating a global oil shortage and increasing the cost of imported oil, with knock-on effects throughout the economy.

The state’s 2025 budget of $163 billion is about $4.8 billion more than this year and includes a massive $27.2 billion increase for the military, which could reach $40.1 billion. It follows the 2024 budget which, despite the war, contained no tax increases or significant spending cuts, generated a large budget deficit and postponed the bill until later.

Finance Minister and Religious Zionist leader Bezalel Smotrich is proposing deep spending cuts as well as tax increases to finance the war – currently estimated to cost $66.8 billion by the end of this year. year – and close a deficit of $10.7 billion in 2025. Still, the budget deficit will reach 4.4 percent of GDP, higher than the 2.25 percent forecast due to the growing cost of the war.