Israel’s defense budget has nearly tripled since the war began. Netanyahu wants more
Defense spending has risen from NIS 62 billion on the eve of the war to as much as NIS 183 billion this year, while the prime minister is pushing to expand a long-term package to NIS 400 billion.
Prime Minister Benjamin Netanyahu ordered last Thursday that the state budget for 2026 be reopened and that defense spending be anchored for more than a decade, the next 13 years.
The practical meaning is that Israel may need to enact a new 2026 state budget even though the August budget is already being implemented, elections are just 81 days away and the Knesset is in recess. At the Finance Ministry, officials say they currently have no way to calculate the implications of the move for either the deficit or the debt, because the final amount demanded by the defense establishment "changes every minute," according to a senior Treasury official.
The Finance Ministry describes the move as an "unprecedented event", not only because of the sums involved, but because of the scale of the commitment, its proximity to the elections and the fact that the Knesset is currently in recess. Treasury officials also argue that there is no genuine urgency to make a 13-year commitment: throughout the war, they say, every immediate defense demand has been addressed.
The push for the move is coming from the defense establishment and Netanyahu, who argue that the commitment is necessary and urgent. The Treasury sees it differently. In its view, the current political timetable creates a window of opportunity to lock in a massive long-term commitment before another government takes office and has the chance to change it.
Even among the government bodies that are supposed to implement Netanyahu's directive, there is uncertainty over whether it constitutes a binding instruction or merely reflects the prime minister's current position. What might appear to be a technical distinction goes to the heart of the issue: a decision involving hundreds of billions of shekels is being advanced without comprehensive staff work, multi-year planning, a full assessment of its implications or a final price tag.
That is why Treasury officials describe the move as "far beyond crossing a red line, it is crossing a black line."
The Treasury says Netanyahu was presented with numerous alternatives for financing the additional spending in 2026, including efficiency measures, cuts and internal changes, but rejected them outright. The concern is that when additional money is readily provided, there is little incentive for the defense establishment to become more efficient.
Since the 2026 budget was approved, defense demands have increased repeatedly. "First they asked for another NIS 2 billion ($667 million). When an answer was given, it went up to 3. Then 8. Then 12. Then 20," Treasury officials say. In their view, every solution offered by Finance Minister Bezalel Smotrich and Netanyahu becomes the new floor from which the next demand begins. "There is no end to this," they say.
The scale of the increase is striking. On the eve of the war, the defense budget stood at NIS 62 billion ($20.7 billion). When the 2026 budget was approved in December, it was set at NIS 112 billion ($37.3 billion). Since then, it has increased in two stages, first to NIS 143 billion ($47.7 billion) and then by another NIS 15 billion ($5 billion), bringing it to NIS 158 billion ($52.7 billion).
That amounts to an increase of NIS 46 billion ($15.3 billion) in just eight months, without formally reopening the budget.
Separately, the defense establishment received another NIS 25 billion ($8.3 billion) through various mechanisms. The Treasury did not specify whether this represents new money or an internal reallocation, meaning it cannot be included definitively in the calculation. If it is new money, the effective scope of defense spending in 2026 is approaching NIS 183 billion ($61 billion), almost three times its level on the eve of the war, in nominal terms.
The multi-year defense plan that the Finance and Defense ministries had already agreed on was based on an additional NIS 350 billion ($116.7 billion). The framework consisted of NIS 250 billion ($83.3 billion) from the state budget, NIS 50 billion ($16.7 billion) from efficiency improvements and another NIS 50 billion ($16.7 billion) from internal revenues.
Netanyahu is now demanding that the total be increased to NIS 400 billion ($133.3 billion).
Strengthening the IDF is one of Netanyahu's election promises, as his political standing has deteriorated in recent polling. Of the budgetary component of the plan, about NIS 120 billion ($40 billion) has already been allocated, including NIS 6 billion ($2 billion) for defense, NIS 40 billion ($13.3 billion) for helicopters and aircraft and NIS 1.5 billion ($500 million) for the implementation of the Mor Yosef Committee's recommendations on the rehabilitation of wounded IDF soldiers.
Mehran Prozenfar, the former economic adviser to the IDF and the Defense Ministry, is now responsible for defense budgets at the Finance Ministry. He was selected for the position by Smotrich in an effort to rein in the rapid growth of defense spending. Accountant General Michal Abadi-Boyanjo, who returned to the position several months ago and is responsible for implementing the state budget, did not attend the discussion.
Both were members of the Nagel Committee, which examined Israel's defense budget and concluded that the additional defense spending required over the coming decade would amount to NIS 275 billion ($91.7 billion), including the previous year. The committee also determined that the 2026 defense budget should total NIS 96 billion ($32 billion), including an additional NIS 15 billion ($5 billion) for reinforcement.
In practice, defense spending is already approaching NIS 183 billion ($61 billion) if the additional NIS 25 billion ($8.3 billion) is counted.
Nearly eight months into the year, there is also no current IDF plan for the two NIS 50 billion ($16.7 billion) components that are supposed to come from efficiency measures and internal revenues. The first section of the decision was supposed to establish the base of the defense budget. That, too, has not been implemented.
This exposes one of the central problems with the proposal: the government is being asked to anchor a budgetary structure 13 years into the future when its own base has not yet been defined and NIS 100 billion ($33.3 billion), more than a quarter of the proposed NIS 400 billion ($133.3 billion), does not have a clearly defined funding source.
The Treasury describes the situation as one in which the government is conducting a rigorous discussion about how to distribute money that already exists, while barely discussing where the additional money will come from.
The second problem is that, for precisely the same reasons, it is impossible to calculate the enormous defense budget's implications for Israel's deficit and debt. There is no final number, no agreed budgetary base and no clear funding sources for the years ahead.
As a result, the government cannot properly formulate the "numerator", the fiscal tool anchored in law that describes its future commitments and includes the budgetary measures, such as tax increases or cuts, needed to meet fiscal targets.
The Treasury turns that uncertainty into an argument against the urgency of the move. If the defense establishment's needs were genuinely urgent, officials argue, there would at least be a reasonably stable number. Instead, the demands continue to change.
Moreover, the Treasury argues, a decision of this magnitude is particularly difficult to justify on the eve of elections and while the Knesset is in recess, especially when every immediate operational requirement of the IDF has so far received a budgetary solution.
There is also a broader economic concern. Israel's deficit and debt are among the key variables used by capital markets and credit-rating agencies to assess the country's fiscal position.
A 13-year trajectory of defense spending is precisely the kind of information investors and rating agencies seek when assessing government risk and determining the yields Israel will have to pay on its debt.
Anyone assessing the Israeli government's fiscal risk premium in the coming year will therefore be working with a range rather than a defined number. And uncertainty of this kind is typically priced conservatively.
The talks between the Finance and Defense ministries have effectively stalled in recent days. The Defense Ministry has accused the Treasury of exploiting the election period to preserve its control over the budget. The Treasury has turned the accusation around, arguing that the defense establishment is exploiting the political timetable to pressure the political leadership into making a decision immediately.
The next government, whatever its political composition, will technically have the authority to change any decision Netanyahu makes. But that ability may be largely theoretical.
Contracts and commitments for future years can be canceled, but doing so can carry financial penalties. More importantly, a future prime minister could face a political cost that few would be willing to pay: announcing that Israel is reducing its defense preparedness after October 7.
Alongside the economic questions is a separate legal one: what mechanism would allow the government to reopen an approved budget just weeks before an election, while the Knesset is in recess?
Changing the budget requires legislation. That means the legal question is distinct from the economic debate, and its answer will determine whether Netanyahu's directive represents merely a policy preference or something the government can actually implement.
A senior legal source familiar with the details told Calcalist that "in principle, this is possible." It would require the approval of a Knesset committee and several Knesset proceedings, including votes in the plenum and the Finance Committee to amend the Budget Foundations Law.
But the source stressed that the government would need a "really satisfactory explanation" for why the change could not wait, namely, evidence that the measure is urgent or that it concerns circumstances that were not known in advance.
"I don't see how it would be possible to justify this," the source concluded.
