Israel's Budget Deficit Stable at 3.3% as Tax Revenues Surge in July

Israel's budget deficit remained steady at approximately 3.3% of GDP in July, according to the preliminary budget execution report released by the Accountant General's Department of the Ministry of Finance. The monthly deficit was about 4.8 billion shekels, nearly identical to the figure from July 2025. However, the cumulative deficit since the start of 2026 was significantly lower at around 11.5 billion shekels, compared to 37.2 billion shekels during the same period last year, reflecting recovery from the economic impact of the first war with Iran.

Tax revenues showed strong momentum, with a real increase of 13% in July compared to July 2025. Total government revenues in July reached 55 billion shekels, and year-to-date revenues totaled approximately 362.1 billion shekels, up 11.8% from 323.8 billion shekels in the previous year. Tax revenues alone rose by 14.5%, with direct taxes growing 14% and indirect taxes increasing 9%. Notably, income tax deductions from salaried workers and capital markets rose by 12%, and income tax from self-employed individuals surged 21%, while corporate tax collections increased by only 3%.

On the expenditure side, government spending in July was about 59.9 billion shekels, up from 52.9 billion shekels in July 2025. Year-to-date government spending totaled 373.6 billion shekels, a moderate 3.5% increase compared to the previous year and below the planned 7.4% budget increase. Defense spending stood out with a 12.6% rise, while civilian ministries saw a 1.3% decrease. Compensation fund payments since the start of the year were estimated at 8.8 billion shekels.

The total financing requirement since the beginning of the year was about 11.1 billion shekels, funded through net local debt issuance of 41 billion shekels, net foreign debt issuance of 16.6 billion shekels, and privatization revenues, mainly from land sales, totaling 4.6 billion shekels. The Accountant General's Department noted that expenditure growth is expected to accelerate in the coming months.