Full Breakdown
Israel’s Finance Ministry Unveils Tough Economic Plan Ahead of Election
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End of Gasoline Subsidy Triggers Price Surge
Finance Minister Bezalel Smotrich announced that the subsidy that lowered gasoline by NIS 1 per liter for the past two months will end at midnight on Saturday. The Finance Ministry expects the price of self-service 95-octane gasoline to rise to NIS 8.90 per liter, with an immediate increase of NIS 0.52 observed at the start of October 1, 2026. The ministry notes that a modest 1 % decline of the dollar against the shekel will partially offset the hike. Higher fuel costs are projected to lift prices for electricity, water, public transportation and other goods whose rates have been frozen by the government.
New Tax Measures to Boost State Revenue
To compensate for the lost subsidy, the Finance Ministry plans additional tax initiatives. These include mandatory reporting of income from residential property rentals and taxation of rental income from the first shekel earned, ending the current exemption for earnings up to NIS 5,654 per month. A levy on international content providers—often called the “Netflix tax”—is also under consideration, along with reductions in tax benefits for pension contributions and the removal of VAT exemptions for certain sectors. The ministry estimates that these measures could generate NIS 10 billion in revenue.
Funding an Expanded Defense Budget
The core driver of the fiscal package is the need to finance a larger defense budget, projected to reach NIS 187 billion. The Finance Ministry expects to fund this through sharp cuts to coalition allocations and efficiency reforms across ministries. Because the new coalition must pass a 2027 budget—or a two-year budget covering 2027-2028—by the end of the year, the ministry anticipates operating under a continuing budget if approval is delayed.
Market Reaction Remains Steady
Despite Prime Minister Benjamin Netanyahu’s warnings about the crypto economy and potential sanctions, the Tel Aviv Stock Exchange showed little reaction. After an initial dip on the final trading day before the elections, the market quickly recovered, with most sectors moving into positive territory except for banking stocks.
Immediate Implementation Timeline
The Finance Ministry’s plan is slated for rapid rollout, requiring the incoming coalition to act before the new government is formally established. The tight timetable underscores the urgency of securing funding for defense while managing inflationary pressures from rising fuel and utility costs.