Israel’s parliament on Thursday approved the framework for the 2025 state budget and its accompanying economic plan, clearing a political hurdle that likely paves the way for final approval by the end of the month to avoid the collapse of the government.

The current budget for 2025 sets the deficit target at a maximum of 4.9 per cent of gross domestic product, higher than an initial figure of 4.4 per cent. Total spending will be 619 billion shekels ($169.19 billion), excluding debt servicing, 13.6 per cent higher than last year.

The deficit was 6.8 per cent of GDP in 2024, a year in which all three ratings agencies cut Israel’s credit rating.

“This is a wartime budget, but also a budget of hope — one that provides the military and the security system with all necessary resources to defeat the enemy while supporting reservists, business owners, reconstruction efforts in the north and south, and Israel’s economic growth,” Finance Minister Bezalel Smotrich said after the vote.

Israel’s economy grew 0.9 per cent in 2024 and is forecast to grow around 4 per cent this year.

Smotrich had hoped the budget would be approved by the end of 2024, but political infighting among coalition partners delayed the final vote. Failure to approve the budget by the end of March would trigger snap elections.

The budget only narrowly passed its first vote in December after a rebellion from one of Prime Minister Benjamin Netanyahu’s far-right partners – Israeli Security Minister Itamar Ben-Gvir and his six-seat ultranationalist Otzma Yehudit party – who sought the firing of Israel’s attorney general.

Some members of Israel’s powerful ultra-Orthodox parties – partners in Netanyahu’s ruling coalition – also threatened to vote against the budget if the government did not pass a new law formalising military service exemptions for religious students.

They also demanded more than 1 billion shekels ($273 million) for their seminaries and other favoured areas.

A parliamentary spokesperson said that in Thursday’s vote of 62-50, with one abstention, all coalition members voted in favour.

Israel’s parliamentary finance committee said it would debate the 2025 budget draft on Sunday. Once approved there, it would head to the full plenum sometime next week for the budget’s final two votes.

As part of the budget, Israel will ramp up combating so-called black capital, while easing taxes on high-tech firms and making it easier for state-owned companies to pay dividends.

Israel spent $31 billion on its military conflicts in Gaza and Lebanon in 2024.