Israel plans to increase its defense budget by about 40 billion shekels (around $13 billion) to finance the war with Iran, according to Bloomberg, which cited a Finance Ministry official who requested anonymity because the plan has not yet been officially announced.
The increase will be part of a revised 2026 budget proposal that will be discussed and voted on by the cabinet headed by Benjamin Netanyahu, before being submitted to the Knesset for final approval before the end of the current month.
Under the plan, the defense budget will rise by about 28 billion shekels (around $9 billion), in addition to allocating 10 billion shekels (approximately $3.2 billion) as a reserve to cover potential military needs.
With this increase, total defense spending is expected to reach about 140 billion shekels (around $45 billion), representing an increase of roughly 115% compared to its level in 2023 before the outbreak of the war in Gaza. Overall government spending could reach nearly 700 billion shekels (about $225 billion).
The increase is primarily intended to replenish military stockpiles and fund the salaries of reserve soldiers, after the army called up more than 100,000 reservists since the war with Iran began in late February, compared to a previous plan that capped reserve service at 40,000 soldiers.
The expansion in spending is also expected to raise the budget deficit, which had previously been set at 3.9% of gross domestic product, while public debt currently stands at about 69% of GDP.
Bloomberg reported that government borrowing needs have risen sharply since the outbreak of the war in Gaza in October 2023. Borrowing reached about 280 billion shekels (around $90 billion) in 2024 before declining to about 200 billion shekels (around $64 billion) last year.
The Finance Ministry estimates that the additional interest costs on loans used to finance the war amount to about 10 billion shekels annually (around $3.2 billion), a figure that could rise if the budget deficit increases further.
If the full increase is not financed through borrowing, the government may be forced to cut spending in other sectors or impose new taxes. The government has already announced austerity measures worth about 30 billion shekels (around $9.6 billion) to finance military operations in Gaza, Lebanon, and Iran, which are expected to continue until the end of 2027.
Under Israeli law, the new budget must be approved before March 31; otherwise, the government will automatically collapse.
