Israel Forms New Defense Procurement Reform Team Amid War-Driven Spending Surge

In March, the Israeli Ministry of Defense set up a secret internal team led by Maj. Gen. (res.) Amir Abulafia, former head of the IDF Planning Directorate. The group, drawn from the Defense and Finance ministries, must submit recommendations by September to Defense Ministry Director-General Amir Baram and Deputy Chief of Staff Maj. Gen. Tamir Yadai, aiming to “shorten and streamline procurement processes for the IDF’s operational needs.”

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Since the Oct 7, 2023 attacks, Israel’s defense procurement has risen to NIS 258 billion (? $88 billion), roughly four times the pre-war annual average. The Ministry of Defense reports NIS 116 billion to large contractors, NIS 101 billion to SMEs, and NIS 41 billion to marketers and importers. The surge has exposed the procurement chain’s slowness.

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Sluggish procurement hampers the IDF’s response to threats such as Hezbollah’s fiber-optic drones, while the war-driven budget strains public finances. Prime Minister Benjamin Netanyahu’s “Doctrine and Policy Guidelines for 2025-2026” outline an open-ended procurement list that could cost up to 800 billion shekels (? $271 billion). Negotiations produced a $94.5 billion ten-year compromise, yet Bank of Israel Governor Amir Yaron warns Israel is on a rising debt path.

Israel risks fiscal crisis as war costs, defense demands soar

Defense Ministry Director-General Amir Baram criticized the Finance Ministry for underfunding defense, warning that budget constraints could slow the buildup. A senior defense official told Calcalist, “What worked for years no longer fits the current reality.” Industry leaders argue delays often stem from the ministry’s own order-issuing, with a senior analyst stating, “If we are serious about identifying bottlenecks, the Defense Ministry must also examine its own conduct.”

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Sources list different defense cost figures: a $95 billion plan, alternatives of $152.6 billion and $84.8 billion, and a final $94.5 billion compromise. The December 2025 agreement set a $37.6 billion budget (plus $1.3 billion), while the Defense Ministry sought $48.85 billion and later added $10.8 billion for war needs.

Israel risks fiscal crisis as war costs, defense demands soar, analysis saysIsrael risks fiscal crisis as war costs, defense demands soarTRT WorldThe Age (Australia)

• “What worked for years no longer fits the current reality.” — Senior defense official, Calcalist interview

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• “When you are dealing with an active battlefield that demands immediate responses, this is time we simply do not have.” — Senior defense analyst

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• “If we are serious about identifying bottlenecks, the Defense Ministry must also examine its own conduct.” — Senior industry analyst

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• “The global situation has changed, and there is no choice but to rethink procurement rules and how we contract with suppliers.” — Senior defense official

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Abulafia’s team must deliver its reform plan by September, proposing a real-time mechanism to clear procurement obstacles. The recommendations will intersect with ongoing fiscal debates over the $94.5 billion defense plan and the Bank of Israel’s debt-to-GDP warning, shaping Israel’s defense and economic outlook through 2035.

Israel risks fiscal crisis as war costs, defense demands soar