Netanyahu Approves Tens of Billions Shekels Increase to Defense Budget, Rehabilitation Funding Excluded

Prime Minister Benjamin Netanyahu has approved a significant increase in Israel's defense budget following a dispute between the Defense and Finance Ministries. After discussions with senior officials, Netanyahu endorsed a plan developed by the National Security Council to resolve the budget crisis. Under this plan, the Finance Ministry will immediately transfer about 12 billion shekels to the Defense Ministry, with an additional 3 billion shekels by the end of the year, supplementing the 2026 defense budget set at 143 billion shekels. Furthermore, by year-end, the Budget Department will allocate another 25 billion shekels in two installments, contingent on the Israel Defense Forces' (IDF) operational needs and performance assessments.

The Defense Ministry estimates that the army requires 25 billion shekels to meet its extensive operational demands, including deployments in Lebanon, Gaza, Syria, the West Bank, and along borders with Jordan and Egypt. The Finance Ministry disputes this figure, considering it an overestimation. Consequently, the defense budget could reach at least 183 billion shekels by year-end, exceeding the official budget framework. The Defense Ministry recently projected IDF needs at 188 billion shekels for the year, though this could decrease if reserve troop deployment is reduced from the current 60,000 soldiers.

The agreement also authorizes the Defense Ministry to commit to long-term procurement contracts based on a multi-year budget totaling 350 billion shekels over a decade. Initial commitments in 2027 will be around 3 billion shekels, increasing to 7 billion in 2028, and stabilizing at approximately 25 billion annually from 2031 to 2039. This budget boost aims to finance urgent weapons acquisitions and repay about 15 billion shekels owed to major defense companies such as Elbit Systems, Israel Aerospace Industries, and Rafael.

However, funding for the rehabilitation of war casualties has been excluded from this agreement. The Finance Ministry opposed financing reforms to the Defense Ministry's Rehabilitation Department, despite the surge in casualties since the outbreak of the October 7 war, now in its 1,000th day. A committee led by Professor Shlomo Mor Yosef recommended transforming the Rehabilitation Department into a national authority with greater autonomy and expanded powers to improve care quality. The reform's first-year cost is estimated at 2.5 billion shekels, with an additional 2 billion shekels annually thereafter, on top of the current 10.8 billion shekels budget, double the pre-October 7 level. Since the war began, over 26,000 new casualties have been added, with the total expected to reach about 90,000 by year-end, a 40% increase over three years. Defense Ministry Director-General Amir Baram has urged rapid implementation of the reform to prevent the Rehabilitation Department from collapsing under the growing burden.