A senior official in "Israel's" Ministry of Finance told Yedioth Ahronoth on Tuesday that the substantial budgets earmarked for 2025 to rebuild northern and southern settlements are currently "frozen" and "cannot be utilized until the government budget receives final approval."

The website noted that the delay in approving the 2025 government budget "is already inflicting significant harm on the economy," adding that the Finance Ministry is now concerned that "Israel" may operate for an entire quarter on an interim budget, with the allocations for January, February, and March limited to 1/12 of the original 2024 budget for each month.

However, "the Finance Ministry's Accountant General opted to allocate a reduced budget, anticipating the possibility of needing to finance additional months under an interim budget. This approach aims to create a reserve to prevent disruptions to funding for vital services for Israelis."

The website reported that the Finance Ministry highlighted a significant gap of $27 milion between the original 2024 budget and the 2025 budget. This shortfall is expected to create a severe budgetary constraint in the first quarter of the year, leading to disruptions in government services provided to Israelis and delaying the implementation of many new programs planned for 2025.

According to the report, sources within the political establishment estimate that the government budget will not be approved in its third reading before the end of March, due to pressure from the Haredi parties over the proposed conscription law, which they do not support.

Economic disaster looms 

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In this context, a senior government economic source expressed to Yedioth Ahronoth significant concern over the possibility that the government budget may not be approved by the legally mandated deadline of March 31.

The source stated, "If that happens, it will be disastrous," adding that "the government's inability to manage the full budget required during the war, with a large deficit and crucial security tasks left unaddressed, will inflict severe damage to both the economy and national security."

The source explained that, beyond its impact on the Israeli economy, services, and media, as well as the negative outlook on "Israel’s" credit rating from Moody’s, Fitch, and S&P, the use of an interim budget will also lead to severe security repercussions. This includes damage to areas such as "armament, plans to strengthen military forces, soldier recruitment, and the expansion of border protections, including along the eastern borders and in the West Bank".

The website reported that the damage caused by the use of the temporary budget has already become evident in government ministries. Sources within the economic ministries (Finance, Economy, Labor, Welfare, Agriculture, Health, and Transportation) warned that the situation will worsen over the next two months, as no new initiatives planned for the current year will be able to be carried out.

Budget discussions proceed at a 'slow pace' 

Furthermore, under the budget law, if this situation continues, elections must be called within 100 days, and the government will be required to function with a temporary budget for a minimum of seven months.

It is also important to note that discussions on the budget and settlements law are taking place across five Knesset committees, despite only two months remaining before the final approval of the government budget, with key sections of the settlements still pending approval.

In this context, Knesset Finance Committee Chairman Moshe Gafni recently rebuked Finance Ministry officials for presenting partial and outdated data to the committee. The figures revealed the budget deficit was at 4.4%, despite prior announcements by Finance Ministry representatives that the deficit was expected to rise to 4.9%.

On that note, the website indicated that the increase in the 2025 budget deficit is expected primarily due to the expected approval by the government of the Nagel Committee’s recommendations to immediately increase the security budget by $1.67 billion, in addition to the additional budget required to rebuild the North and to pay compensation to the displaced and to compensate companies during the coming months.