Full Breakdown
Clash Over Israel's Defense Budget Amid Ongoing War
11/12/2025, 10:57:19 AM
Tensions Between Defense and Finance Ministries
The Israeli Defense Ministry, led by director Amir Baram, has publicly criticized the Finance Ministry for delaying critical defense contracts amid ongoing budgetary disputes. Baram stated that the Treasury's actions are jeopardizing Israel's security by postponing essential deals worth billions of shekels, which include munitions, spare parts for tanks, and drone acquisitions. He emphasized the urgency of these procurements in light of escalating threats from Iran and other adversaries. The Finance Ministry, under Finance Minister Bezalel Smotrich, has countered that the Defense Ministry has been inefficient in managing its budget, which has ballooned due to the ongoing war with Hamas.
Financial Implications of the War
The war, which began on October 7, has already cost Israel approximately NIS 250 billion ($76 billion), with direct defense expenditures accounting for NIS 180 billion. The current defense budget stands at NIS 163 billion, projected to decrease to NIS 90 billion by 2026, representing only 4.5% of GDP. In contrast, Baram noted that the defense budget had previously constituted 35% of GDP following the Yom Kippur War. The Finance Ministry's proposed budget for 2025 includes significant cuts to social services and education, with defense spending expected to rise to NIS 102 billion ($27.2 billion), potentially reaching NIS 150 billion depending on negotiations.
Criticism of Budget Cuts
The proposed budget cuts have sparked backlash from various sectors. The Defense Ministry has condemned cuts to welfare benefits and public sector wages, arguing that they will adversely affect wounded soldiers and bereaved families. Eli Ben-Shem, chairman of the Yad Labanim organization, expressed shock at the decision to freeze benefits for bereaved families, calling it unacceptable during wartime. Critics, including National Unity chairman Benny Gantz, have accused the government of prioritizing political agendas over responsible fiscal management, urging a shift from a sectoral budget to one that genuinely addresses national security and economic stability.
Proposed Tax Increases and Spending Cuts
To address the growing fiscal deficit, which reached 2.6% of GDP in October, the Finance Ministry is considering tax increases and further spending cuts. Proposed measures include freezing tax rates and reducing benefits for pension savings. Additionally, the government plans to tax "trapped profits" from corporations, which could generate significant revenue. The central bank has warned that the ongoing conflict and rising inflation could lead to a prolonged economic downturn, with growth projections revised downward.
Upcoming Budget Approval Process
The Finance Ministry aims to submit the 2026 budget for government approval by December 4, with subsequent readings in early January and March. Failure to pass the budget by the end of March could trigger new elections. As the government navigates these financial challenges, the balance between national security and economic stability remains a contentious issue.
Verbatim Quotes
- “Instead, the Finance Ministry is holding back the Defense Ministry and delaying the signing of dozens of critical deals worth billions of shekels, including munitions, spare parts for tanks, drone acquisitions for combat units, protection for communities along the Lebanon and Gaza borders, and more.” — Amir Baram, Director, Defense Ministry
- “we cannot have a strong army if we have no way to finance it… but the economy also depends on security. If there is an ability to damage our cities, our industry, then obviously our economic capacity would be affected.” — Benjamin Netanyahu, Prime Minister
- “The economic effort is an inseparable part of the war effort,” — Bezalel Smotrich, Finance Minister
- “So there is a need to cut but this budget has cuts in education, health, welfare [paired with] increases in taxes such as VAT and cuts in stipends that harms the weakest [members of society],” — Vladimir Beliak, Yesh Atid MK
Conflicting Reports & Gaps
There are discrepancies regarding the projected budget deficit, with estimates ranging from 6.6% to 8.1% of GDP. Additionally, the exact figures for defense spending and social service cuts remain contentious, with various stakeholders providing differing assessments of the budget's impact on Israeli society.
