Israel's Treasury Considers Budget Cuts Amid Defense Spending Dispute
Translated & summarized from Calcalist by baba
Israel's Ministry of Finance is considering broad budget cuts across government ministries to fund urgent defense needs, two weeks before elections. This follows the collapse of a $1 billion deal for Apache helicopters due to financing disputes, with defense officials blaming the Treasury. Defense sources claim the proposed cuts, estimated at up to 2 billion shekels, are unrelated to the helicopter deal and insufficient to address a larger defense budget deficit. Negotiations are ongoing for a significant increase in the defense budget for 2026.
The story in 5 lines · by baba
- Israel's Finance Ministry is exploring government-wide budget cuts to fund defense needs before elections.
- A $1 billion deal for Apache attack helicopters collapsed due to financing disagreements.
- Defense officials accuse the Finance Ministry of torpedoing the helicopter deal and delaying budget allocations.
- The proposed cuts are seen by defense sources as insufficient to address a 40 billion shekel defense budget deficit.
- Israel faces potential delays and increased costs for other critical military procurements, including refueling tankers and transport helicopters.
Two weeks before elections, Israel's Ministry of Finance is exploring a sweeping cut across government ministries to free up funds for urgent defense needs. The ministry has not specified the amount or the exact defense requirement. This move comes amid a severe dispute between the Finance and Defense ministries, escalating recently after a deal for 12 Apache attack helicopters from Boeing, worth about $1 billion, collapsed. The deal fell apart due to disagreements over financing for one-third of the cost, totaling $288 million.
The Israel Defense Forces (IDF) and the Ministry of Defense blamed the Finance Ministry for the deal's failure, despite receiving three extensions from the US for a formal order. The latest extension ironically expired on the third anniversary of the October 7th attacks. Defense officials warned that future purchases would be more expensive and delayed due to the loss of a favorable production slot at Boeing. While some speculate the proposed budget cuts aim to salvage the helicopter deal, defense sources dismissed this as a "spin," asserting the cuts are unrelated to the helicopter procurement, which they claim the Finance Ministry torpedoed.
Defense sources also stated that the potential cross-ministry cuts would not exceed 2 billion shekels, calling it a "drop in the ocean" compared to a 40 billion shekel deficit in the 2026 defense budget, which they accuse the Finance Ministry of systematically delaying. The need for new helicopters was determined after a two-year assessment by the Air Force following the October 7th attacks, as they are intended to replace aging Apache models used for over three decades and incorporate new capabilities.
Beyond the helicopter deal, defense officials fear similar fates for two other major procurements. By year-end, Israel must order two KC-46 aerial refueling tankers from the US for $500 million, adding to six already ordered, for long-range missions including Iran and Yemen. Another deal for six new transport helicopters, costing about $1 billion, in addition to 12 already ordered from Lockheed Martin-Sikorsky, also lacks funding sources. Delays in these orders could significantly extend delivery times by several years.
Currently, the Defense Ministry and IDF are negotiating with the Finance Ministry's budget division to increase the defense budget by 25 billion shekels, based on agreements from June and a National Security Council framework. This framework aligns with the defense establishment's demand for an additional 40 billion shekels by the end of 2026 to fund IDF operations. The Knesset Finance Committee recently approved a 15 billion shekel transfer from Treasury reserves to defense, though it still requires Foreign Affairs and Defense Committee approval. If the additional 25 billion shekels are allocated, Israel's defense budget for the year would reach 183 billion shekels.
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