Netanyahu Orders 400 Billion Shekel Military Budget Increase Amid Election Campaign

Israeli Prime Minister Benjamin Netanyahu has instructed officials to break the state budget and convene the Knesset to pass an additional budget that guarantees a 400 billion shekel increase in military procurement over 13 years. This decision was made during a multi-participant discussion on Thursday and aims to enshrine the funding despite the ongoing election period. The move raises concerns about breaching the deficit target and undermining market confidence in Israel's economy.

Initially, Netanyahu had approved a 350 billion shekel military procurement budget about a year ago, separate from the annual defense budget. The defense establishment has already committed to spending 130 billion shekels, including an urgent purchase of aircraft worth 40 billion shekels. Recent weeks saw the urgent procurement sum rise from 2 billion to 20 billion shekels, necessitating the budget break. The plan involves reconvening the Knesset after its dissolution for elections to pass the new budget.

Netanyahu has emphasized military procurement as a key election campaign issue, highlighting efforts to achieve Israeli defense self-sufficiency with investments in domestic weapons industries. In a podcast interview, he stated his goal to develop an indigenous stealth drone within a decade to reduce reliance on foreign platforms. The prime minister intends to formalize this 400 billion shekel commitment over the next decade by breaking the budget.

The defense budget has surged from 60 billion shekels before the October 7 war to 158 billion shekels this year, with procurement costs additional. Bank of Israel estimates the war's cost at 405 billion shekels, nearly matching Netanyahu's proposed increase. Moody's recent report maintained Israel's credit rating at Baa1 with a stable outlook but highlighted fiscal resilience risks due to rising defense spending and deficits. The agency's next rating decision is expected in November after elections.

Experts warn that breaking the budget during elections without accompanying cuts could force the next government to impose heavy taxes to finance the military buildup. The urgency cited for the budget break is the rapid increase in urgent defense procurement needs, though some argue that prior solutions have addressed immediate requirements. The move could negatively impact Israel's economic stability and credit rating amid ongoing geopolitical tensions.

Summary: Prime Minister Netanyahu has ordered a 400 billion shekel increase in military procurement funding over 13 years, requiring a budget break and Knesset vote during the election period. This unprecedented move aims to bolster defense capabilities but risks breaching fiscal targets and damaging Israel's economic credibility.