Israeli parliament approves amended 2024 budget to fund Gaza war

By Steven Scheer and Maayan Lubell

JERUSALEM (Reuters) -Israeli lawmakers gave their final approval on Wednesday to an amended 2024 state budget that adds tens of billions of shekels to fund Israel's war against the Islamist Palestinian group Hamas in Gaza, as the conflict runs into its sixth month.

The amended budget adds more spending on defence and compensation to households and businesses hurt by the war, which was sparked by Hamas' shock attack on Israel on Oct. 7.

Members of the Knesset, or parliament, voted 63-55 in favour of the spending package of 584 billion shekels ($160 billion), or 724 billion including debt repayment. The plan also includes higher allocations for health, education, police and welfare.

"The amended war budget... has clear goals - to win the war, support the reservists, strengthen the home front and continue to grow the Israeli economy," Finance Minister Bezalel Smotrich said after the vote.

The budget sets a deficit of 6.6% of gross domestic product (GDP) in 2024, revised from a pre-war level of 2.25%. But in February, the deficit rose to 5.6% over the previous 12 months from 4.8% in January.

Israel last year approved a two-year budget for 2023 and 2024, but the Gaza war has shaken up government finances, requiring budget changes and additional spending.

Spending was boosted by 70 billion shekels from the original budget - with 55 billion shekels going to the military and 15 billion to finance civilian needs.

The budget has become politically charged, in particular over funds to religious institutions that Prime Minister Benjamin Netanyahu's Likud party agreed to under a 2022 coalition accord with religious parties.

Despite calls by the central bank and opposition lawmakers to cut spending not related to the war, most of the so-called coalition funds will still be allocated, though there will be some tax hikes on cigarettes, tobacco products and bank profits.

Moody's last month downgraded Israel's credit rating to A2, citing material political and fiscal risks for the country stemming from the war. It was the first time that Israel's rating has ever been cut.

"Israel's most sectarian, disconnected (from reality) and irresponsible budget ever has been approved with cowards' votes," said opposition leader Yair Lapid.

Speaking in the Knesset, Lapid accused Netanyahu's coalition of abandoning ordinary Israelis and said the public would be paying for the failures of his government.

($1 = 3.6483 shekels)

(Reporting by Steven Scheer and Maayan LubellEditing by Gareth Jones)