On Friday, "Globes" revealed that Prime Minister Benjamin Netanyahu had instructed professional staff at the Ministry of Finance, the Ministry of Justice, and the Ministry of Defense to prepare a proposal for breaching limits on the state budget in order to secure a military spending program of NIS 400 billion over thirteen years.
Today, the Bank of Israel published comments on the plan. "Governor of the Bank of Israel Amir Yaron has in the past presented the fiscal and macro-economic implications of raising the defense budget by NIS 350 billion over the next decade, stressing the need to return to a declining debt:GDP ratio and its importance," the central bank stated.
"The Bank of Israel even recommended the formation of a committee to examine the defense budget and the balance between defense and civilian needs, and participated in the Nagel Committee. In particular, the Bank of Israel stressed that decisions on substantially expanding the defense budget need to be accompanied by decisions on the way in which the additional expenditure will be funded.
"The Bank of Israel was not however privy to the decision-making process on a NIS 350-400 billion addition to the defense budget."
A year ago, Netanyahu decided on a NIS 350 billion military procurement budget, in addition to the annual defense budget. So far, the defense establishment has committed to spending NIS 130 billion, part of which was for an urgent purchase of aircraft amounting to NIS 40 billion. A few weeks ago it was argued that the military procurement budget would have to rise by NIS 2 billion in the current year. Since then, the amount has swollen to NIS 29 billion, requiring the budget framework to be breached.
The plan, "Globes" has learned, includes convening the Knesset after it was dissolved and passing a new state budget that will incorporate these commitments.
The plan is likely to have a negative impact on the economy. The state budget has been reopened several times since the start of the war, but this was part of reinforcing the various fronts. The last time, at the height of Operation Roaring Lion against Iran, the Knesset amended a budget that was being debated at the time, and the defense budget shot up from NIS 111 billion to NIS 143 billion.
Since then, the defense establishment has claimed that there is a NIS 40 billion gap between the approved defense budget and the budget required, and a further NIS 15 billion was transferred to the defense budget, bringing it to NIS 158 billion. Before the war, the annual defense budget was NIS 60 billion.
Unlike previous occasions, when the budget was reopened at the height of rounds of fighting, the plan is to do so again, but during an election period, in a way that is liable to be interpreted by the markets as part of an election campaign. This comes after the international rating agencies have listed expansion of the defense budget and raising of the debt:GDP ratio as threats to forecasts of economic recovery.
Published by Globes, Israel business news - en.globes.co.il - on August 9, 2026.
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