Unveiling 2026 budget plan, Smotrich targets 3.2% deficit, calls for defense spending efficiency

Finance Minister Bezalel Smotrich presents an initial state budget framework for 2026, based on a deficit target of 3.2 percent of gross domestic product, calling for more efficient management of defense spending following two years of ballooning war costs.

“The defense establishment cannot continue to hold the stick at both ends,” says Smotrich. “On the one hand, it is a system with great appetite and need for funds, and on the other hand, it will have to do the hard work to manage this resource.”

The budget deficit in 2024 reached 6.9% of GDP due to higher defense and civilian spending as a result of the war with the Hamas terror group in Gaza. It has since eased to 4.7% in September.

To date, the two-year war has cost the economy NIS 250 billion ($77 billion), out of which NIS 180 billion ($55 billion) were direct costs spent on defense and security, according to Smotrich.

Speaking at a press conference in Jerusalem, Smotrich vows to lower taxes for the working population and advance a reform in the banking system, including taxation.

Also speaking at the press conference, Finance Ministry Director-General Ilan Rom criticizes the defense budget management as “wasteful,” calling for structural changes in defense spending for greater efficiency.

“Defense spending is the cornerstone of the budget, and it will determine what the budget will look like,” remarks Rom.