Israel's 2026 State Budget: A High-Stakes Political Gamble

The Israeli Knesset is set to conduct a first reading of the 2026 state budget on Monday, which amounts to NIS 662 billion (approximately $197 billion), excluding debt servicing. The budget proposal includes a deficit ceiling of 3.9% of gross domestic product and significantly increases defense spending to NIS 112 billion ($35.45 billion). The approval process is critical; if the budget does not pass all three readings by the end of March, the Knesset will dissolve, triggering early elections.

Knesset to vote on first reading of 2026 state budget

The budget vote occurs amid a political standoff between Prime Minister Benjamin Netanyahu's government and the haredi (ultra-Orthodox) parties, specifically Shas and United Torah Judaism (UTJ). These parties have threatened to withhold their support for the budget unless agreements are reached regarding a controversial haredi draft bill aimed at conscription. Critics argue that the current draft bill does not adequately enforce conscription and is primarily a political maneuver to appease the haredi factions.

Knesset to vote on first reading of 2026 state budget

Netanyahu has struggled to maintain a stable coalition majority since July, following the collapse of negotiations over the haredi conscription legislation. The government has reportedly secured initial support from the haredi parties for the budget, contingent upon assurances that the draft legislation will progress shortly thereafter.

Knesset to vote on first reading of 2026 state budget

Opposition leader Yair Lapid, representing the Yesh Atid party, has been vocal in his criticism of the budget. He described it as “a wasteful, negligent budget that will continue to exploit and grind down working people who pay taxes, serve in the reserves, and keep the country alive.” Lapid specifically condemned the allocation of funds to haredi parties as part of the budget, reflecting broader concerns about fiscal responsibility and social equity.

Knesset to vote on first reading of 2026 state budget

The advancement of the haredi draft bill was postponed from a previous Knesset session to prioritize the budget vote. Discussions regarding the draft bill are scheduled to continue on Tuesday, with the Knesset Foreign Affairs and Defense Committee's legal adviser indicating that certain sections of the bill may require amendments. Yesh Atid MK Vladimir Beliak expressed confidence that the budget will pass its first reading despite ongoing political infighting, emphasizing the urgency for the government to advance both the draft exemption law and budget discussions concurrently.

Knesset to vote on first reading of 2026 state budget

The upcoming budget vote represents a pivotal moment for Netanyahu's government, balancing the demands of coalition partners against the backdrop of potential early elections. The outcome will not only shape Israel's fiscal landscape for 2026 but also influence the political stability of the current administration.

Knesset to vote on first reading of 2026 state budget