The finance minister is expected within days to bring a proposal to the Cabinet to increase the defense budget by billions of shekels and raise the state budget deficit by 0.3%-0.5% from the current target set for 2026, 3.9%. ynet has learned that the prime minister and the finance minister are considering opening a special budgetary “box” to finance part of the war’s costs, so that the spending would not fall directly on the state budget figures.
The demands from the defense establishment for an increase in the defense budget are higher than the additional amount announced by the finance minister in his statement, namely 9.5 billion shekels ($3.07 billion) to fund the current campaign. In any case, it will likely be necessary to raise the deficit target by several tenths of a percentage point.
Officials in the defense establishment say each day of fighting in the current war with Iran and Hezbollah costs about 1.5 billion shekels. That means that by tomorrow (Monday), the 10th day of the current war with Iran, the cumulative cost will reach about 15 billion shekels. If the campaign continues for another four weeks, as U.S. President Donald Trump said, the cost would amount to an additional 42 billion shekels.
Officials at the Finance Ministry completely reject that estimate, noting that the broader cost to the economy — beyond military expenses — must also be taken into account. They estimate that the economic cost amounts to at least 1 billion shekels per business day, or about 5-6 billion shekels per week.
Senior ministry officials fear that a war lasting four weeks, as suggested by Trump, would push the state budget deficit to a very high level of 4.5% to 5.0%, far beyond the most recent deficit estimate of about 3.9% (an update from the original deficit target of 3.2%). “Another year will be lost and will greatly increase the debt-to-GDP ratio,” a senior Finance Ministry official told ynet and Mamon.
In any case, the additional spending will require government approval. Only after the funds are transferred to the defense establishment will the Knesset be required to approve the budget increase retroactively.