Israel spent $75.7 billion on the war through 2025, with costs set to persist for years
The Accountant General’s latest financial report puts the direct cost of the war at NIS 231 billion through 2025, excluding 2026 spending and lost tax revenue. Defense spending accounted for the largest share, while reserve duty, compensation and rehabilitation costs are creating new long-term demands on the state budget.
The Accountant General released the State of Israel’s financial reports on Tuesday. The approximately 470-page document attempts to summarize the assets and liabilities of all government ministries, auxiliary units, government-owned companies and statutory corporations. In total, it encompasses financial and accounting data from 209 entities.
The report’s primary importance lies not in any new information it contains, but in the organized internal process it creates across these bodies. Preparing the reports has resulted in most entities now having audited financial statements. However, a number of entities still lack audited reports. A prominent example is the Ministry of Defense, which has draft financial statements but no audited ones. The Accountant General’s Office said it is working to change this.
Another advantage of the report is that it provides a comprehensive overview of broad budgetary issues. Particularly notable is its analysis of war-related expenditures. It clarifies and standardizes the figures for the direct costs of the war while offering a preliminary assessment of the future burden on the state budget.
The aggregate figure shows that the government spent approximately NIS 231 billion ($75.7 billion) on the war between 2023 and 2025. This sum excludes expenditures for 2026 as well as lost tax revenue. War-related expenses can be divided into three categories: defense spending of NIS 166 billion ($54.4 billion), compensation of NIS 27.3 billion ($9 billion), and rehabilitation and other civilian expenses of NIS 37.9 billion ($12.4 billion).
Let’s begin with defense. The broad defense budget stood at NIS 75 billion ($24.6 billion) in 2022, representing 4.3% of GDP. This budget surged to NIS 98 billion ($32.1 billion) in 2023, NIS 168 billion ($55.1 billion) in 2024 and NIS 166 billion ($54.4 billion) in 2025. For 2026, it currently stands at a minimum of NIS 158 billion ($51.8 billion).
This means the defense budget is hovering around 8% of GDP, compared with 4.3% before the war. Of course, not all defense spending can be attributed to the war. According to the Accountant General’s calculations, NIS 166.2 billion ($54.5 billion) over these three years is classified as the "war-related defense budget."
A key aspect of the defense budget is its internal allocation. In 2025, the budget for IDF disabled veterans and bereaved families reached NIS 11 billion ($3.6 billion). The Ministry of Defense projects that this figure will rise to NIS 13.9 billion ($4.6 billion) in 2026, up from just NIS 7.3 billion ($2.4 billion) in 2023. This is a fixed expenditure that is expected to persist for years.
Another major component is the IDF wage bill, which stood at NIS 36.5 billion ($12 billion) in 2025, compared with approximately NIS 31 billion ($10.2 billion) in 2023. This increase is also expected to persist in the coming years, as it reflects the personnel, both soldiers and civilian employees, employed by the defense establishment.
The third category is reservist pay. In 2023, costs stood at NIS 8.7 billion ($2.9 billion), despite the war beginning only in October. In 2024, they reached NIS 37 billion ($12.1 billion). More importantly, there was no significant reduction in reserve duty costs in 2025, when they remained at approximately NIS 32 billion ($10.5 billion).
It is already clear that spending on reserve duty over the coming decade will be far higher than it was before the war.
We now turn to the fourth and largest component of the defense budget: procurement and operations. This component stood at NIS 88 billion ($28.9 billion) in 2024 and NIS 86 billion ($28.2 billion) in 2025. While these figures may have declined in subsequent years, the government and defense establishment are inclined to launch force-building programs costing tens of billions of shekels.
Taken together, these components make clear that a significant reduction in the defense budget is unlikely under the current trajectory. Israel will have to adjust to larger defense budgets. The defense establishment is seeking a 2027 defense budget starting at NIS 117 billion ($38.4 billion).
Ninefold surge in disability benefits for victims of hostilities
Other war-related expenses that will persist for years are the direct costs associated with the human toll of the conflict.
Before the war, the National Insurance Institute paid only about NIS 500 million ($164 million) annually to victims of hostilities. That figure surged threefold to NIS 1.5 billion ($492 million) in 2023, rose to NIS 2.5 billion ($820 million) in 2024 and is projected to reach NIS 3.6 billion ($1.2 billion) in 2025.
Consider, for instance, disability benefits for victims of hostilities. Before October 7, the cost to the state was approximately NIS 200 million ($66 million) per year. Today, it stands at NIS 1.7 billion ($557 million), a ninefold increase.
The Ministry of Finance believes that a significant portion of the increase in National Insurance costs stems from one-time outlays, such as special grants. However, there is considerable uncertainty regarding the long-term costs, partly because roughly 90% of the casualties suffered psychological trauma, injuries that may manifest or worsen over time.
In any event, this represents an annual addition of approximately NIS 2 billion ($656 million) to the state budget.
Beyond the budgetary figures, there is the human toll. Since October 7, approximately 119,000 claims have been filed with the National Insurance Institute, of which 87,000 individuals have been recognized as victims of hostilities.
As of September 2026, 1,024 civilian fatalities, 298 widows and widowers, 1,201 bereaved parents and 1,199 orphans, including 120 who lost both parents, had been recorded.
In addition to payments made by the National Insurance Institute, the state paid housing grants to evacuees totaling approximately NIS 5.1 billion ($1.7 billion) by the end of 2025. Grants for return and resettlement totaling NIS 1.9 billion ($623 million) were also provided, alongside other grants.
A briefing for journalists at the Ministry of Finance revealed that approximately 91% of residents from "Gaza Envelope" communities for which a return date had been set have returned to their homes. Currently, residents of four communities have not returned, and only one community, Nir Oz, has no set return date.
Another significant expense involves the Compensation Fund. By the end of 2025, approximately NIS 27 billion ($8.9 billion) had been disbursed from the fund to cover direct and indirect war-related damages. By September 2026, the total disbursed had reached approximately NIS 37 billion ($12.1 billion). Only NIS 2.8 billion ($918 million) now remains in the fund.
In a briefing held by Accountant General Michal Abadi-Boiangiu and her deputies, officials expressed satisfaction with the Property Tax Fund model, which enables the state to utilize extra-budgetary funds during emergencies. However, there is concern that the Property Tax Fund could be depleted even before the 2027 budget, requiring the government to identify an alternative source of funding.
It is important to emphasize that these are technical and operational challenges. The State of Israel is legally obligated to pay this compensation and will do so unless the law is amended. Compensation payments are expected to continue into 2027 because some claims have not yet been resolved.
The final category of war-related expenses concerns the rehabilitation of communities. A budget of NIS 17.5 billion ($5.7 billion) was approved for the Tkuma Directorate, covering the period through 2028. As of the end of 2025, the government had committed only NIS 11.6 billion ($3.8 billion) of that amount, with NIS 5.4 billion ($1.8 billion) actually utilized during 2025.
Regarding the Tnufa Directorate, which is responsible for rehabilitating the North, a "Headquarters for the Rehabilitation of the North" was initially established with an allocation of NIS 12 billion ($3.9 billion).
In December 2025, a decision was made to establish the "Tnufa LaTzafon" (Momentum for the North) Directorate, staffed by 29 employees. In June 2026, the government adopted a multi-year plan for the rehabilitation and development of the North. The plan includes an additional budget of NIS 6.6 billion ($2.2 billion).
