Israel Allocates 100 Billion Shekels for Reservist Pay Amid Prolonged Conflict Costs
Since the outbreak of the Iron Swords war on October 7, 2023, Israel's reservist pay has accounted for about one-third of the total war expenses, reaching approximately 100 billion shekels out of 280 billion shekels spent so far. The defense budget for 2026 was dramatically increased to 143 billion shekels, more than double the pre-war annual budget of around 68.5 billion shekels. This budget hike followed a series of revisions, including a reduction in planned reservist numbers from 60,000 to 40,000, and adjustments after the early launch of Operation Roaring Tiger in February 2026, which initially required an estimated 39 billion shekels for a 30-day campaign in Iran alone.
The ongoing conflict has lasted over 1,020 days, with peak reservist deployment reaching about 145,000 personnel. The cost formula used by the defense establishment estimates that every 10,000 reservists cost the economy 5 billion shekels annually, with monthly peak costs for reservist salaries alone reaching 3 to 4 billion shekels. In 2026, reservist expenses are projected to total around 30 billion shekels.
Operational equipment has suffered heavy wear and tear, with repair and replacement lagging behind the pace of damage. Hundreds of vehicles, including Humvees, are currently out of service due to spare parts shortages and long repair times. Meanwhile, global arms demand driven by conflicts in Ukraine, NATO budget increases, and Taiwan's preparations against China have disrupted supply chains and driven up prices. The U.S. has responded by doubling defense production rates and approving massive deals like the $58 billion Patriot missile contract, which has contributed to rising costs.
Despite these challenges, Israel maintains a strategic partnership with the United States, which has provided critical support such as the deployment of the THAAD missile defense battery in Israel. This system reportedly intercepted over 300 ballistic missiles during the conflict, with each interception costing about $20 million, amounting to roughly $6 billion in defensive aid. Hosting U.S. forces in Israel also incurs hundreds of millions of shekels in costs, partially offset by local economic benefits.
Looking ahead to 2027-2028, Israel's defense establishment warns that maintaining security across three key fronts, Lebanon, Gaza, and Syria, will require sustained high budgets of 140 to 150 billion shekels annually, contrary to the Finance Ministry's desire to revert to pre-war budget levels. On a positive note, Israeli defense exports hit a record $19.2 billion in 2025, underscoring global demand for Israeli technology and positioning the defense tech sector as a key driver of national economic growth.
