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 regarding 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 in the year in installments, depending on actual budget execution and further agreements between the ministries.

This budget shortfall arose from unexpected security developments not accounted for in the original plan, including a prolonged war with Iran, 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 armaments 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, estimated at 350 billion shekels over the next decade. The defense system secured a commitment for about half of this amount, with an annual increase of roughly 10 billion shekels. The previously agreed procurement of two fighter jet squadrons, including F-15IA and F-35I "Adir" aircraft valued at around 40 billion shekels, remains in place. These jets are expected to be integrated into the Air Force over the coming decade to gradually replace older models but will not expand the force size initially.

Defense sources explained that the budget gap resulted from dramatic changes in operational reality. The Iran conflict, initially expected to start in June and last two weeks, began in March and lasted about 40 days. The prolonged 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, with over 100,000 reservists called up simultaneously compared to the planned 30,000, and currently about 60,000 active reservists remain, double the planned force size.

Earlier reports indicated a compromise plan to increase the defense budget, with the Finance Ministry initially allocating 12 billion shekels immediately and up to 25 billion shekels more by mid-November, contingent on the IDF's budget execution. However, 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 warning followed an in-depth Finance Ministry discussion about 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.