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A sharp rise in defense spending has reshaped Israel’s public finances. Israel’s defense budget for 2026 rose to more than *** billion Israeli shekels, or about **** billion U.S. dollars, an increase of over *** percent compared with pre-war 2023 levels. In both subsequent years, actual spending exceeded the planned defense budget. This rapid and sustained expansion in security outlays put clear pressure on the country’s fiscal position.

Conflicts driving a rise in government spending

The growth in defense expenditure in Israel mirrors the country's hightened focus on military readiness prompted by the Israel-Hamas war. The direct costs of this war averaged at a monthly expenditure of over *** billion Israeli shekels, approximately *** billion U.S. dollars, during its first 12 months. The start of the U.S.-Israel war with Iran on February 28, 2026, may further inflate military spending above the allocated amount.

Growing national debt

The ramifications of increased defense spending are evident in Israel's national debt figures. By the third quarter of 2025, general government debt had swelled to over *** trillion Israeli shekels, some *** billion U.S. dollars. This represented an ****percent increase in 12 months. The escalation in debt levels highlights the financial strain of sustaining heightened military expenditure, which reached **** percent of the country's GDP in 2025.