Israel pushed toward dangerous debt path as multi-front war costs mount, report says

Israel is being pushed toward a dangerous debt path as the cost of its multi-front attacks and rising defense demands place heavy pressure on public finances, according to Israeli Ynetnews on Tuesday. Citing an analysis by Calcalist, the report said Prime Minister Benjamin Netanyahu's government is struggling to contain defense spending after Oct. 7, 2023, with a proposed $95 billion defense plan, while continuing military operations raise concerns over higher debt and weakened fiscal stability.

Open-ended procurement

The report said Netanyahu's classified "Doctrine and Policy Guidelines for 2025-2026," prepared in late 2025, reshaped the country's security strategy by instructing the military to prepare for multiple arenas. The document effectively amounted to an open-ended procurement list, with Netanyahu reportedly approving every military demand. Defense officials estimated the broadest interpretation would cost about 800 billion shekels ($271 billion).

Compromise reached

Following negotiations between the Finance and Defense ministries, a compromise was reached for $94.5 billion over 10 years. Part of the plan, including the purchase of two new air force squadrons, was approved Sunday by the ministerial procurement committee.

Debt projections

With the plan and efforts to reduce dependence on US aid, Israel's debt-to-GDP ratio is expected to reach 83% by 2035, according to the report. Bank of Israel Governor Amir Yaron has already said the country is on a rising debt path. The report warned that a prolonged war would carry far more severe consequences for living standards.

Budget disputes

The Finance and Defense ministries have been locked in a budget dispute, with the Defense Ministry demanding an additional 30 billion shekels for 2026 unrelated to the war. Following the war, the budget was revisited and another $10.8 billion was allocated for war needs.