Israel Submits 2026 Budget to Knesset Amid Coalition Tensions and Military Spending Increases
Israel's Finance Ministry has submitted the 2026 budget draft to the Knesset, proposing a significant increase in defense spending to NIS 112 billion ($35.45 billion) amid ongoing coalition tensions. The budget, which includes reforms such as reduced dairy tariffs and a tax on e-cigarettes, must be approved by the end of March to prevent early elections. Political infighting, particularly regarding military conscription exemptions for ultra-Orthodox parties, poses a challenge to securing support for the budget.
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Israel's Finance Ministry submitted the 2026 state budget draft to the Knesset ahead of a preliminary vote, facing significant political challenges. The budget includes increased defense spending of NIS 112 billion ($35.45 billion) and proposed reforms such as reduced tariffs on dairy imports and a tax on e-cigarettes.
The budget must be approved by the end of March to avoid triggering early elections. The ruling coalition, strained by political infighting and demands from ultra-Orthodox parties regarding military conscription exemptions, threatens support for the budget.
If passed, total state spending would reach 662 billion shekels with a deficit ceiling of 3.9% of GDP. The budget deficit improved to 4.7% in 2025 from 6.8% in 2023, primarily due to increased defense costs related to the Gaza conflict.
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