Gaza War Strains Occupation Budget, Raising Deficit to 5.2%

The Israeli government approved an increase in the military budget while cutting funds for other ministries, due to the ongoing war on Gaza and Israel’s plans to occupy the area.

According to Hebrew reports, the Israeli government approved a 30.8 billion shekel increase in the state budget allocated to the military, due to the ongoing conflict in Gaza and the repercussions of the June attack on Iran.

Based on the new data and approvals, the budget deficit for the Israeli government will rise from 4.9% to 5.2%.

The government also approved a series of broad cuts across various sectors, most notably in coalition agreements and government ministries’ budgets.

More than half a billion shekels will be deducted from coalition agreement budgets, representing an overall reduction of 11%, decreasing from approximately 5 billion shekels to 4.5 billion shekels.

Opposing the decision were National Security Minister Itamar Ben Gvir, Yoav Kisch, Haim Kats, Vasarlaov, and Amir Kahil.

Just before the Israeli government’s meeting to approve the breach of the state budget, documents received by ministers showed that the goal was to increase defense spending amid the continuation of the Gaza war, while reducing all government expenditure items by 3.5% starting in 2026, claiming this would reduce the budget deficit.

The Israeli newspaper “The Marker” reported that this is the fifth time the government has approved a budget breach since the start of the Gaza war. The government will approve increasing the state budget by 30.8 billion shekels, most of which will be allocated to the military budget.

It is noted that the state budget for the current year had set a financial deficit cap of 4.2%, which later was raised to 4.2%. Under the current proposal for the budget breach, the deficit is projected to reach 5.2%.

According to the proposal, the defense budget will increase by 28.9 billion shekels to over 140 billion shekels, nearing last year’s defense budget of 160 billion shekels.

Additionally, 1.7 billion shekels will be allocated to increase spending on interest payments for government loans due to the rising deficit. This amount will be added to the 56.2 billion shekels designated in this year’s budget for repaying interest on loans obtained from external sources.