Knesset to vote on raising deficit, increasing defense spending amid Iran war

By Ariela Karmel

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16 March 2026, 11:47 pm

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Ariela Karmel is a political correspondent at The Times of Israel. She previously reported for Calcalist and Haaretz. She holds an MA in Middle Eastern and African History from Tel Aviv University and a BA in Political Science from the University of British Columbia.

The Knesset is set to vote this evening on Finance Minister Bezalel Smotrich’s proposed bill to increase the deficit ceiling and defense spending within the proposed 2026 budget, in light of Israel’s war against Iran and Hezbollah.

The bill seeks to amend the proposed budget and raise the deficit ceiling to 5.1% of GDP, up from 3.9%, and allow roughly NIS 32 billion ($10.2 billion) in additional government spending above the legal expenditure cap.

It also calls to create a contingency reserve of up to NIS 7 billion ($2.2 billion) for security needs if war-related defense spending exceeds NIS 28 billion ($9 billion) — the amount that the government voted last week to transfer to the NIS 112 billion ($34 billion) defense budget by instituting a 3% cut across all ministries.

The government simultaneously authorized over NIS 5 billion ($1.6 billion) in discretionary funds for Haredi institutions, West Bank settlements, and other party priorities in the 2026 state budget, while also announcing that it had set aside its controversial draft exemption bill for yeshiva students, so that the 2026 state budget can be passed as quickly as possible to help cover the cost of the war with Iran.

The coalition repeatedly postponed discussion of the bill given fears that the ultra-Orthodox parties Shas and United Torah Judaism would vote against it, which remains a possibility.

The state budget passed its first reading in January with partial Haredi support, and needs to pass its second and third readings by March 31 or the government will fall, with a new election called automatically.