Israel Faces Massive Defense Budget Hike Amid Ongoing Regional War

Israel's defense budget is projected to approach approximately 540 billion shekels between 2023 and 2026, more than double the amount allocated in the preceding four years. This surge reflects the immense costs of a three-year regional war, which has involved fighting on eight fronts, extensive reserve duty call-ups, rapid ammunition consumption exceeding production rates, and the rehabilitation of numerous war casualties.

Despite the significant expenditure, none of the fronts that have defined Israel's security agenda since October 7 have been closed. Threats from Iran, its nuclear program, and its proxies like Hezbollah in Lebanon, Hamas in Gaza, and the Houthis in Yemen persist. The war has resulted in 30,000 IDF casualties over three years, with 63% suffering from psychological trauma. The Rehabilitation Division is currently managing 91,200 wounded, including 42,500 with mental health issues and PTSD, a number expected to reach 100,000 by 2028, prompting an 88% budget increase to 10 billion shekels for the division.

Defense Ministry officials view the current budget increase as temporary, with plans for hundreds of billions more in reserve for replenishing depleted ammunition stocks, which were used in frequent clashes in Gaza, strikes in Beirut, and targeting missile launchers in Iran. Future plans, part of a "strong decade" initiative starting in 2027, aim to accelerate domestic weapons production, develop new operational capabilities, expand space presence, acquire additional helicopter and aircraft squadrons, and establish a new branch for unmanned systems and robots, alongside increased procurement of armored vehicles.

A proposed plan by the Prime Minister to increase the defense budget by 400 billion shekels over the next 13 years has not materialized. The ongoing operation of tens of thousands of reservists, costing around 100 billion shekels since the war began, is attributed to a severe shortage of combat and support personnel, exacerbated by ongoing attrition. The IDF is short approximately 15,000 soldiers, half of whom are combat troops, while the Haredi population's refusal to enlist, with government approval, further strains resources. Chief of Staff Eyal Zamir has warned that without increasing the service base, the reserve system will collapse, a concern seemingly unheeded by the cabinet.

Mutual suspicion between the Finance and Defense Ministries hinders progress, with the Finance Ministry urging efficiency and careful planning before future reserve call-ups. Concurrently, efforts are underway to rehabilitate areas affected by the conflict. Approximately 90% of the 60,000 evacuated residents from northern Israel have returned, living amidst ongoing explosions. Of the 13.4 billion shekels allocated for northern development until 2030, about 6 billion shekels have been implemented, with Aviad Friedman playing a key role in translating plans into growth for the region.