Finance Committee Approves $4 Billion Boost for Defense Budget
The Knesset Finance Committee has approved the transfer of approximately NIS 14.75 billion (about $4 billion) to the Ministry of Defense and the IDF. This allocation completes a key phase of an agreement reached between the Treasury and the defense establishment last summer.
Of the total amount, NIS 11.75 billion is drawn from the general reserve, with an additional NIS 3 billion reallocated from defense and transportation spending categories. The specific uses of these funds were detailed in a classified discussion. This transfer actualizes a budget increase agreed upon in July, rather than being a new decision made this week.
The approved sum raises the defense budget to approximately NIS 158 billion, a significant increase from the previous NIS 143 billion. This follows an earlier boost of over NIS 30 billion at the start of the year due to the ongoing war and expenditures related to Iran. The defense budget has substantially grown in recent years, now constituting a larger portion of the state budget compared to pre-war levels.
The original agreement between the Treasury and the defense establishment included an initial NIS 15 billion, with provisions for a further review of up to NIS 25 billion later in the year. This second tranche remains under discussion. If fully approved, the defense budget could approach NIS 183 billion. Notably, the current funding comes primarily from reserves and internal reallocations, differing from increases that would expand the deficit.
The more significant debate is expected around the additional NIS 25 billion, which will likely require new revenue sources such as taxes, spending cuts, remaining reserves, or deficit expansion. The fund transfer occurs amidst a significant cash flow problem for defense industries, with the state reportedly owing companies like Rafael, Israel Aerospace Industries, and Elbit Systems around NIS 17 billion. This debt impacts procurement, inventory, and future planning, with the defense establishment warning of potential disruptions to munitions and aircraft orders, as well as the need to fund reservists and replenish depleted stocks.
The cumulative cost of the wars since October 2023 is estimated at NIS 230 billion, with ongoing expenses for restocking, equipment repair, missile procurement, system maintenance, and reservist payments continuing for years. Even with the latest approval, the budget debate is far from over. The current infusion provides the defense establishment with operational flexibility and allows for the settlement of some obligations. The decision on the remaining NIS 25 billion will determine whether the 2026 defense budget stabilizes around NIS 158 billion or climbs towards NIS 180 billion or more.
