Breaking Update
2026 State Budget Passes First Reading
Israel's Knesset approved the 2026 state budget and economic plan in a first reading, a NIS 660 billion package designed to boost growth and fiscal.
The Knesset plenum approved this evening, in a first reading, the state budget and the economic plan for 2026. The budget will now proceed to further discussions in the various Knesset committees, ahead of the completion of the legislative process.
The budget will amount to approximately NIS 660 billion, and the deficit ceiling for 2026 has been set at 3.9% of GDP. The budget is intended to return the Israeli economy to a path of growth and fiscal responsibility, after two years of war budgets in which the Israeli economy supported the National security effort.
As part of the economic plan, a reduction in income tax was determined by widening the tax brackets, alongside measures to alleviate the cost of living and strengthen competition in the economy.
The Ministry of Defense budget is being consolidated into reasonable frameworks and will amount to approximately NIS 112 billion, with the aim of ensuring the security of the citizens of the State of Israel and the IDF’s ability to deal with Security threats.
The plan also includes a reform in the dairy sector, strengthening local production and Israeli agriculture, aimed at addressing market concentration and monopolies and leading to lower prices for milk and cheese for the public. In addition, the budget allocates significant additional resources to a range of nationally important areas, including an allocation of over NIS 3 billion for a program to promote Artificial intelligence in the economy and its integration into government ministries, alongside expanding investment in infrastructure and accelerating economic growth.
Among the reforms included in the economic plan are: promoting national infrastructure, creating competition in banking services, a tax on banks, and additional measures to reduce the cost of living for Israeli citizens.
Minister of Finance Bezalel Smotrich: “This is a budget of national responsibility and a determined fight against the cost of living – with the dairy reform, opening banking to competition, lowering income tax for the middle class, and significant investments in high-tech, AI, education, infrastructure, health, and welfare. The budget translates economic strength into real relief in the daily lives of Israeli citizens. This is also a budget of security on the front and in the rear by strengthening fighters, reservists, and the civilian home front. Thanks to Prime Minister Benjamin Netanyahu, Coalition Chairman Ofir Katz, and all my coalition partners for their leadership and responsibility. We are now moving on to the committees and the second and third readings until full implementation on the ground.”
Director General of the Ministry of Finance, Ilan Rom: “Completing the budget approval in the second and third readings in the Knesset is essential for the continued work of the government for the public and will contribute to Israel’s economic stability and continued economic prosperity. We have incorporated into the budget a response to security challenges, alongside the beginning of a gradual process of tax relief, and the promotion of innovation and advanced technology. We are driving processes that will strengthen Israel’s economy for years to come, and we continue the determined fight against black capital and preparation for significant regional economic opportunities.”
