Israel's War Damage Fund Nears Depletion, Faces Funding Crisis

Israel's state financial data for 2025 reveals that the War Damage Compensation Fund is rapidly depleting, potentially forcing the next government to increase its allocations. The report, prepared by the Accountant General in the Ministry of Finance, Michal Abadi-Boyango, covers approximately 89% of government entities.

The fund, established to cover direct and indirect war-related damages, is financed by property purchase taxes. Since the start of the war until the end of last year, 37 billion shekels were paid out. An additional 5 billion shekels were disbursed in early 2024 following the "Operation Iron Swords" operation. Currently, only about 2 billion shekels remain in the fund.

This situation presents a significant financial challenge for the incoming government, which may need to allocate more funds to ensure the compensation mechanism remains operational. The law stipulates a base deposit rate of 15%, but the Finance Minister, with Knesset Finance Committee approval, can alter this. Deposit rates have fluctuated significantly, reaching 25% in 2021, dropping to zero in 2022-2023, soaring to 80% in 2024, and hitting 100% in 2025, before returning to 25% from 2026 onwards.

The report highlights the strain on the fund due to sustained high payouts for war damages against dwindling reserves, underscoring the need for the next government to secure adequate funding sources.