Israeli Finance Committee Approves Major Budget Reallocations for 2026

Israel's Knesset Finance Committee has approved significant changes to the 2026 state budget, including the transfer of approximately 15 billion shekels primarily to the Ministry of Defense and the Israel Defense Forces (IDF). The committee also allocated around 801 million shekels to the Ministry of Finance and an additional 33 million shekels in conditional spending tied to revenue. These funds are designated for the Tax Authority, the Compensation Fund, and the Accountant General's units.

A substantial portion of the approved funds, about 630 million shekels, is earmarked for the actuarial balance of the Compensation Fund. This is in response to the compensation framework for businesses established during Operation "Iron Sword," which is expected to create a cash flow deficit in the fund. Additionally, 164 million shekels were transferred from the general reserve to the National Insurance Institute to cover payments for employees placed on unpaid leave during the same operation.

Further allocations include approximately 39 million shekels in conditional spending for the Coordinator of Government Activities in the Territories (COGAT), as part of internal budget adjustments within the Ministry of Defense. The largest single transfer, about 11.75 billion shekels from the general reserve, is also designated for the Ministry of Defense. Due to the classified nature of this information, the specific uses of these defense funds were detailed in a joint session of the Finance Committee and the Foreign Affairs and Defense Committee. An additional 3 billion shekels from various defense and transportation expenditure items were also approved for the Ministry of Defense.

During the committee's deliberations, issues concerning reservists were raised. Following a request from the committee, an IDF representative agreed to examine claims that the processing days for reservists have been reduced. The committee also addressed financial aid for non-profit organizations and public institutions impacted by the ongoing conflict. Under the 2026 economic aid plan, at least 40 million shekels are to be allocated to support these entities whose income has been affected and who are not eligible for compensation under property tax laws. Committee Chairman MK Hanoch Milavsky halted the discussion until this matter was clarified. Following a review, the Ministry of Finance announced that a claims system for these organizations would open after the Sukkot holiday.