Israel Reaches Budget Deal to Immediately Transfer NIS 15 Billion to the IDF

The Finance Ministry and the Defense Ministry have reached agreements over the budget gaps between the two ministries through the end of the year, after a prolonged period of dispute over the scope of resources required by the defense establishment. Under the understandings, the Finance Ministry will immediately transfer NIS 15 billion to the Defense Ministry, bringing the defense budget in practice to NIS 158 billion—the highest amount since the founding of the state.

The Israel Hayom website reported today (Thursday) that Prime Minister Benjamin Netanyahu personally intervened in the dispute between the sides, effectively recognizing the budget gap the defense establishment had been warning about, estimated at roughly NIS 40 billion for the 2026 budget. According to the agreement, the initial addition of NIS 15 billion will be financed through a security reserve of NIS 12 billion and a civilian reserve of NIS 3 billion.

The remaining budget gap, estimated at about NIS 25 billion, will not be transferred at this stage and will be reexamined in two additional rounds by the end of the year, in line with updated state revenue forecasts. While the defense establishment argued throughout this period that the Finance Ministry was ignoring the budget gap it had flagged, the Treasury argued in response that the defense establishment’s demands went beyond what was necessary.

The dispute centered on the Defense Ministry’s request for an additional budget of about NIS 43 billion, which it said was needed in order to meet existing missions “in the current configuration as required by the political leadership.” The Finance Ministry rejected the request, arguing that it was an excessive increase. In the end, with mediation by the National Security Council, an agreed framework was formulated under which the immediate addition will be transferred, alongside the creation of an orderly mechanism to examine the remaining budget issues later in the year.

Under that mechanism, representatives of the Finance Ministry and representatives of the Defense Ministry will meet every month and examine the spending structure of the Defense Ministry and the IDF. If the reviews show that the defense establishment needs additional funding, the issue will be discussed במסגרת the mechanism agreed upon by the two sides. 

Toward the end of the year, as noted, the budget will undergo another review in two rounds, with officials at the Finance Ministry estimating that there will be no need to transfer additional funds to the military. The Finance Ministry also stresses that even the transfer of NIS 15 billion is not expected to breach the state budget framework, since these are funds that were set aside in advance as reserves for security needs.

The agreement also addresses the defense establishment’s long-term force buildup plan. In the past, the prime minister announced a force buildup plan worth NIS 350 billion for the coming decade, but until now the IDF had not been given authorization to commit to carrying out the required procurement. In practice, the defense establishment committed to expenditures based only on the prime minister’s approval, without approval from the Finance Ministry.

It has now been determined that the defense establishment will receive authorization to commit to contracts with the defense industries and carry out procurement במסגרת the force buildup plan, subject to approval by the Ministerial Committee on Procurement. In the first stage, the system is expected to move ahead, among other things, with ordering new aircraft and establishing additional production lines for interceptors.

In the background to the agreement were the sharp warnings voiced by the defense establishment about the consequences of the budget shortfall. In a document circulated by Deputy Chief of Staff Maj. Gen. Tamir Yadai, it was written that there is a gap of about NIS 40 billion between the IDF’s needs and the budget allocated to it, and that the gap is leading to “direct harm to the IDF’s readiness and force buildup.”

That same document detailed that the IDF has already been forced to take a series of cutback measures because of the budget shortfall, including slowing procurement processes, postponing purchasing and contracts, reducing the scope of training and instruction, freezing expenses that are not immediately essential, and cutting discretionary activities. It was further emphasized that the cumulative consequences of these steps are leading to “real harm to the ability to sustain the IDF’s current stability.”