Finance Minister Promises Cut Will Be Reversed, Source of Funds Unclear

The Israeli government approved a sweeping NIS 2.6 billion budget cut on Sunday, initially perceived as routine. However, ministry directors-general quickly voiced strong objections. Moshe Bar Siman Tov, Director-General of the Ministry of Health, called the cut "impossible," while a senior official from the Ministry of Welfare warned it would "severely harm the weakest populations."

Protests against the cut subsided after Finance Minister Bezalel Smotrich and his ministry's Director-General, Yisrael Malachi, assured ministry heads that the cut would be reversed, citing a "budgetary source" of NIS 2.6 billion. Smotrich stated in a government meeting that the source would be known in a month and expressed confidence that the cut would not need to be implemented. Malachi further reinforced this by referring to a "source," creating an impression that the cut was merely technical. Some officials, based on Smotrich's promise, have privately labeled the cut a "fake cut."

The Finance Ministry has also used the existence of this undisclosed NIS 2.6 billion source to criticize the Ministry of Defense, suggesting they were unwilling to wait a month for the funds to become available. However, the exact nature of this budgetary source remains a closely guarded secret by Smotrich and his associates, with even those assured of the cut's reversal unaware of its origin.

Sources involved in the budget discussions suggest the secrecy stems from the source being "very sensitive" and tied to coalition funds that cannot be accessed before elections. The implication is that Smotrich plans to implement a targeted cut after the elections to replace the current broad one, possibly to avoid electoral damage. Notably, approximately NIS 700 million allocated to coalition funds, which are unlikely to be utilized due to legal constraints, were not excluded from the cut. This includes funds for yeshiva students awaiting a conscription law, which remains stalled.

Despite assurances that the cut will be reversed, government ministries are currently operating as if the cuts are in effect, as they cannot rely on future reversals. This uncertainty is already impacting ministry operations and delaying projects. An alternative theory suggests Smotrich might be referring to reopening the 2026 budget after the elections, potentially triggered by a large-scale military operation. Prime Minister Benjamin Netanyahu's previous attempt to reopen the 2026 budget for defense needs, with opposition support, failed. Smotrich's office has not yet provided a response.