The deficit deepens, taxes on the agenda: the economic account awaiting the next government

The election results left the political system without a clear decision, but the Israeli economy cannot wait. The defense budget, the depleted property tax fund, and required tax reforms will stand at the center of the agenda. Experts warn of uncontrolled defense spending and call for setting priorities.

The election results in Israel left the political system without a clear decision, but the Israeli economy cannot wait. The defense budget, approved in March 2026 at 143 billion shekels, had an additional 15 billion from war reserves and cuts of 3.6 billion shekels. The defense establishment claims a shortage of an additional 25 billion shekels by the end of the year. The property tax fund, which finances compensation for war damages, has been almost completely depleted after payments of 37 billion shekels since the outbreak of the war. The debt-to-GDP ratio jumped from 60% before the war to 68.5% at the end of last year. Experts, including former Accountant General Yahli Rotenberg and former Chief Economist Yoel Naveh, warn of uncontrolled defense spending and call for setting priorities, raising taxes, and drafting Haredim. Naveh defines the threat of sanctions on Israel as an existential threat.