From the Liveblog of
Wednesday, January 28, 2026
Despite Bank of Israel opposition, MKs advance bill setting deficit ceiling at 3.9%
Add ToI as a Preferred Source on GoogleSam Sokol is a former political correspondent at The Times of Israel. He was previously a reporter for the Jerusalem Post, Jewish Telegraphic Agency and Haaretz. He is the author of "Putin’s Hybrid War and the Jews"
Lawmakers vote 62-55 in favor of the first reading of the Deficit Reduction and Budgetary Expenditure Limitation Bill, setting the deficit ceiling for 2026 to 3.9 percent of GDP. The bill will be forwarded to the Knesset Finance Committee for preparation for its final two readings.
“The prolonged and intense fighting has led to a structural increase in government expenditures over the medium and long term,” requiring setting the deficit ceiling at this level, the bill’s explanatory notes state.
“The primary increase is in defense and interest expenses; however, civilian expenditure has also grown, due in part to increases in welfare spending for benefits to victims of hostilities, rehabilitation costs for geographic areas damaged in the fighting, expenditures for the mental health system, and more.”
The Bank of Israel deems 3.9% as too high since it does not allow for a reduction in the debt burden.
The budget deficit slipped to 4.7% of GDP in 2025 from 6.8% in 2023. A spike in defense costs due to the Gaza war pushed the deficit higher over the past two years.
Reuters contributed to this report.
The Times of Israel Community.