Israel's parliament has approved the government's 2026 budget, which includes a substantial supplementary defense allocation to address the war with Iran. The necessary funds will be raised through increased borrowing and reductions in civilian spending.
The spending plan was passed on Monday morning by a vote of 62 to 55. The total budget amounts to 699 billion shekels ($222 billion) and sets a deficit target of 4.9% of GDP.
Defense spending constitutes the largest single expenditure at 143 billion shekels, an increase of approximately 120% compared to the 2023 budget prior to the Gaza war. An additional 60 billion shekels has been reserved for potential costs related to the conflict with Iran or other military needs. This brings the supplementary defense budget to at least 380 billion shekels, accounting for about 2% of GDP.
Last week, in a video statement, Prime Minister Netanyahu said, "This war is very costly, which is why we need a special budget, including tens of billions of shekels, to increase defense spending."
The sharp rise in defense expenditure will necessitate a wider fiscal deficit. However, the projected deficit ratio was revised down from 5.1% after Israel's banks agreed to a one-time payment of approximately 3 billion shekels to the state treasury.
The approval of the budget allows Netanyahu's cabinet to remain in power. Under Israeli law, the government would have automatically collapsed if the budget had not been passed by March 31st.
Comments