Israel's 2026 budget needs balance between defense, civilian spending: Official

Al Arabiya

27-05-2025

Israel's budget deficit for 2026 needs to be no more than 4 percent of gross domestic product, a senior Finance Ministry official said on Tuesday.
While the economy is strong and resilient, defense spending is high and risks harming civilian outlays such as in education, health, welfare and infrastructure, said Yali Rothenberg, Israel's Accountant General.
A spending balance is needed to 'ensure that defense spending does not overshadow priorities,' Rothenberg said at the Israel Democracy Institute's annual economics conference.
Defense spending has jumped since the war began on Oct. 7, 2023 when Hamas gunmen attacked Israel. The budget deficit in 2024 reached 6.9 percent of GDP although it has since eased to 5.1 percent in April. The debt-to-GDP ratio rose 7.7 points last year to 69 percent.
'We need to reduce the debt-to-GDP ratio,' Rothenberg said. 'The year 2026 will be very important - a test year - we need to restore fiscal space and we need a budget for 2026, because a budget creates certainty and we need certainty for all government ministries.'
He noted that in cutting the deficit next year to 3-4 percent of GDP, it 'will require difficult decisions; but this is the core of fiscal governance - not just numbers but choosing priorities.'
The 2025 wartime budget, which was delayed and approved in March, features a series of tax hikes and spending reductions on non-defense areas aimed at preventing the deficit from becoming unsustainable while Israel finances its military conflict.
Rothenberg said additional investments in infrastructure are needed given Israel's high annual population growth, such as more power plants through public-private partnerships.