Israel’s Finance Ministry said on Monday it delivered the 2026 state budget draft to the Knesset ahead of the first vote scheduled to take place either on Wednesday or next week at the latest, amid political fractures that have strained the ruling coalition.
Finance Minister Bezalel Smotrich said that the government was "determined to pass it [the state budget] on first reading,” during a press conference at the Knesset on Monday.
Delayed by political infighting, the cabinet last month approved the spending plan for this year after defense outlays were raised to NIS 112 billion ($35.45 billion) from an initial 90 billion.
Passing the state budget is part of the annual high-stakes process that could trigger early elections in the country.
If the state budget is not approved in all three readings by the end of March, when the fiscal year closes, the Knesset will automatically dissolve, and elections will be called.
After first approval, the budget will then head to the Knesset’s Finance Committee for further deliberations, where it could change its final two votes in the plenum.
Netanyahu pushes 2026 state budget amid coalition strains
In all, state spending would be 662 billion shekels, excluding debt servicing. The deficit ceiling was set at 3.9% of gross domestic product, a level the Bank of Israel deems as too high since it does not allow for a reduction in the debt burden.
The budget deficit slipped to 4.7% of GDP in 2025 from 6.8% in 2023. A spike in defense costs due to the Gaza war pushed the deficit higher over the past two years.
The state budget vote comes amid the ongoing political collision between the government and the haredi (ultra-Orthodox) parties over the controversial haredi draft bill.
Prime Minister Benjamin Netanyahu has been left without a stable coalition majority since July, following the collapse of negotiations over the conscription bill, which had led to the haredi parties,’ Shas and United Torah Judaism, departure from the government.
Both the haredi parties have threatened not to support the state budget unless agreements were reached regarding the draft legislation, voicing strong objection to the conscription of haredim and to the sanctions to be placed on those who fail to enlist.
Shas threatened to block the state budget unless the conscription bill is passed beforehand, which is not expected to be ready ahead of the state budget plenary vote.
Opposition leader Yair Lapid (Yesh Atid) slammed the state budget outline that was drafted by the government, in remarks during a press conference at the Knesset on Monday.
“The government has presented a budget of the corrupt and the shirkers, wasteful, negligent, continuing to exploit and grind down working people who pay taxes, serve in the reserves, and keep the country alive,” Lapid said.
Lapid criticized funds being transferred to the haredi parties as part of the state budget.
“The budget includes NIS 5 billion in coalition funds. United Torah Judaism will receive NIS 2.1 billion. Shas will receive NIS 1.2 billion,” Lapid said.
“Recognized but unofficial institutions will receive more than half a billion shekels. No details, no explanation, a black hole of billions of shekels,” he added.
“ There is no answer to the question of how and where they will bring more teachers and kindergarten teachers," he said.
"There are no transportation solutions; you will continue to sit in traffic. No solutions for the high cost of living, no fight against monopolies, no market openings. Your grocery cart will get more and more expensive," Lapid added.
With the haredi draft bill not finished in time for the state budget’s first reading, it is not fully clear how the ultra-Orthodox parties will position themselves.
If the haredi parties vote in favor of the budget’s first reading, contradicting their earlier threats, it would grant the government additional time to finalize the haredi draft legislation before the budget’s final readings in March.
According to several reports over the past few days, the government is expected to persuade the haredi parties to vote in favor of the state budget in its first reading, with assurances that the draft bill will be passed soon.
Critics of the draft bill argue that the current outline, led by MK Boaz Bismuth (Likud), fails to enforce haredi conscription and serves primarily as a political measure to appease haredi parties.
Meanwhile, the IDF has warned of a severe workforce shortage and has called for additional combat recruits urgently after more than two years of war.
Legislation enforcing conscription has been widely viewed as critical to Israel’s security needs.
Haredi political figures have pushed for a framework that would continue to exempt yeshiva students from mandatory IDF service.