Israel Agrees on Immediate 12 Billion Shekel Boost to Defense Budget with Further Funds Pending

A compromise plan to increase Israel's defense budget has been revealed, with the Finance Ministry set to immediately allocate approximately 12 billion shekels to the defense budget, currently at about 143 billion shekels. By mid-November, an additional sum of up to 25 billion shekels will be transferred, contingent on the Israel Defense Forces (IDF) meeting performance forecasts for the year. The plan, formulated last week at the National Security Council (NSC), follows extensive discussions involving Prime Minister Benjamin Netanyahu, Finance Minister Bezalel Smotrich, Defense Minister Israel Katz, senior officials from their ministries, IDF Chief of Staff Eyal Zamir, and Deputy Chief of Staff Tamir Yadai.

The NSC document acknowledges a significant budget gap of around 40 billion shekels for 2026, which military and security sources warn could paralyze the army. Besides the immediate 12 billion shekels from budget reserves, the Finance Ministry will transfer an additional 3 billion shekels by the end of 2026 due to budgetary adjustments. The remaining estimated 25 billion shekels will be released later in 2026 based on the IDF's execution performance, with monthly oversight by the NSC until an updated assessment in early October.

The Finance Ministry has expressed willingness to meet the full defense budget demands, potentially raising the budget to a record 183 billion shekels, though the defense establishment requests about 188 billion shekels to cover extensive operational needs, including maintaining three security fronts (Lebanon, Gaza, Syria), rapid escalation readiness, reservist payments, and urgent arms procurement. Officials claim these allocations can be made without breaching the 2026 fiscal framework or increasing the deficit target.

The NSC plan also includes provisions for the Finance Ministry to authorize multi-billion shekel commitments annually from 2027 to 2039, supporting a 350 billion shekel multi-year force-building program. This authorization aims to unblock stalled defense procurement deals. However, the Finance Ministry opposes allocating 2.5 billion shekels for a rehabilitation reform in the Defense Ministry, recommending the ministry fund it internally.

While the agreement may resolve the prolonged dispute between the Finance and Defense Ministries, challenges remain. The imminent dissolution of the Knesset and transition to a caretaker government ahead of the October general elections could complicate budget approvals. Defense officials are eager to finalize the deal swiftly to enable urgent arms orders. The NSC plan now awaits formal approval from both ministries.