Israel Approves Immediate 15 Billion Shekel Boost to Defense Budget Amid Ongoing Conflicts

Significant progress has been made in budget negotiations between Israel's Ministry of Finance and Ministry of Defense concerning the defense system's funding. Due to a budget gap of approximately 40 billion shekels by the end of the fiscal year, it was agreed that an immediate transfer of 15 billion shekels will be made to the Israel Defense Forces (IDF). The remaining 25 billion shekels will be disbursed later this year in installments, based on actual budget execution and further agreements between the two ministries.

This budget shortfall arose from several unforeseen security developments, including a prolonged war against Iran that extended far beyond initial estimates, an extended campaign in Lebanon, large-scale reserve mobilization, and urgent replenishment of depleted munitions and combat equipment. Defense officials stated that the immediate 15 billion shekel transfer will provide the IDF with critical operational breathing room, focusing on restoring combat readiness, replenishing interceptors and ammunition across all branches, repairing worn equipment, and investing in air, land mobility, and naval platforms.

Additionally, agreements were reached on the IDF's multi-year strengthening plan, valued at about 350 billion shekels over the next decade. The defense establishment secured a budget commitment for roughly half of this amount, with an annual increase of about 10 billion shekels. The purchase of two fighter jet squadrons, F-15IA and F-35I "Adir", worth around 40 billion shekels, agreed upon last year, remains intact. These jets are expected to be integrated into the Air Force during the next decade to gradually replace older aircraft but will not increase the force size at this stage.

Defense sources explained that the budget gap resulted from dramatic changes in operational reality compared to original plans. The Iran conflict was initially expected to start in June and last about two weeks but began in March and lasted around 40 days. The extended Hezbollah campaign in Lebanon was also unplanned, leading to a decision to significantly expand the security zone in southern Lebanon. Reserve mobilization far exceeded expectations; plans were based on 30,000 reservists active at any time, but over 100,000 were mobilized simultaneously during the war, with about 60,000 still active, double the planned force size.

Earlier reports indicated a compromise framework for increasing the defense budget, with the Finance Ministry initially allocating about 12 billion shekels immediately and up to 25 billion shekels more by mid-November, contingent on the IDF's budget execution. It was also revealed that the Finance Ministry threatened to raise the VAT rate by 4.5% if the Defense Ministry's demand for an additional 30 billion shekels beyond the agreed 15 billion shekels was implemented. This threat followed in-depth discussions within the Finance Ministry leadership regarding the Defense Ministry's request to raise the defense budget to 188 billion shekels, compared to the 144 billion shekels approved in the 2026 state budget.