Israel Redirects Nearly $1 Billion from Intel Grant to Urgent Defense Budget Needs

The Israeli government approved the transfer of approximately 1 billion shekels to the defense budget for urgent needs. This amount, about 850 million shekels, was reallocated from the Ministry of Economy and Industry's budget, specifically from an unused grant originally intended for Intel. In December 2023, Intel and Israel signed a major agreement in which Intel committed to investing around $25 billion to expand its factory in Kiryat Gat (Fab 38). In return, the government agreed to a grant totaling about $3.2 billion (approximately 11.1 billion shekels), equal to 12.5% of the investment, to be disbursed in stages based on project progress and meeting local procurement and employment targets.

However, in June 2024, Intel announced a freeze on construction at the Kiryat Gat facility due to a global financial crisis affecting the company, leading to widespread cutbacks and project delays worldwide, including in Germany and Poland. By 2024, Israel had transferred about 1.5 billion shekels to Intel for initial project phases. Since grant payments depend on meeting milestones and investment pace, the government canceled the planned 2025 grant payment of about 1.3 billion shekels following the work freeze. Future grant payments are contingent on the full resumption of construction and investments.

The Ministry of Economy stated that the reallocated budget was originally designated by the Ministry of Finance for 2026 and that this adjustment aligns the state budget with the actual pace of commitments and cash flow forecasts based on business sector execution rates.