Israel's Budget Battle: Political Tensions Threaten Economic Plans

Israel's Finance Ministry has submitted the 2026 state budget to parliament for an initial vote. Political divisions in the ruling coalition pose significant challenges to its approval. Increased defence spending amid ongoing conflict and ultra-Orthodox demands exacerbate the situation, complicating efforts to reduce the deficit and avoid elections.

Israel's Finance Ministry has presented the 2026 state budget draft to parliament, aiming for an initial vote on Wednesday. However, political divisions threaten its passage, with coalition tensions heightened by increased defence allocations and ultra-Orthodox demands.

The budget requires approval by March to prevent an automatic election. If the preliminary vote passes, the budget will proceed to a parliamentary finance committee for possible amendments before two additional votes in the plenum.

Over recent years, coalition parties have fractured over the Gaza conflict and military service exemptions. The proposed budget sets a 3.9% GDP deficit ceiling, but financial experts argue this is too high to effectively manage national debt.

(With inputs from agencies.)