Knesset Approves Record 2026 Budget Worth NIS 850 Billion, Boosting Defence and Haredi Institutions as Iran Conflict Expands

The Israeli Knesset early Monday morning passed the largest state budget in the country’s history, a NIS 850.6 billion ($271 billion) spending plan for 2026 that significantly increases defence expenditure while directing substantial funds to ultra-Orthodox (Haredi) educational institutions and other coalition priorities.

The vote, which passed 62-55, averted the risk of early elections that would have been triggered had the budget not been approved before the legal deadline on Tuesday.

Finance Minister Bezalel Smotrich hailed the budget as one that “takes care of everyone and fights the cost of living,” while opposition leader Yair Lapid of Yesh Atid condemned it as “the greatest theft in the history of the state.”

The marathon session was repeatedly interrupted by air raid sirens warning of Iranian ballistic missiles, forcing lawmakers to vote from an alternate fortified room.

Massive Defence Spending Amid Ongoing War
The budget includes a record defence allocation of NIS 143 billion ($45.8 billion) for the Defence Ministry, plus additional wartime funding of NIS 22 billion ($7 billion) in income-dependent expenditure and NIS 82.2 billion ($26.3 billion) in long-term commitments.

Smotrich described the defence package as the “core” of the wartime budget, stating it would enable Israel to “dramatically improve our geopolitical and diplomatic standing” and help “dismantle and rebuild the Middle East.”

Earlier in March, the government had approved a 3% across-the-board cut to all ministries except defence to help finance an extra NIS 28 billion ($9 billion) in wartime spending.

Significant Allocations to Haredi Institutions
The budget also includes substantial funding for priorities of the ultra-Orthodox parties in the coalition. Last-minute amendments added approximately NIS 800 million ($255 million) to programs and institutions favoured by Haredi parties, including yeshivas.

According to a tally by Channel 13, total allocations to Haredi educational institutions rose by more than NIS 1 billion, from NIS 4.1 billion ($1.3 billion) to NIS 5.17 billion ($1.65 billion).

These additions came despite the coalition’s failure to pass a separate bill enshrining blanket exemptions from military conscription for yeshiva students – a key demand of the Haredi parties. Opposition lawmakers accused the coalition of using the budget process to bypass earlier blocks imposed by Attorney General Gali Baharav-Miara on such funding.

Opposition figures strongly criticised the last-minute amendments. Lapid posted on X that “there’s never been anything like this in the history of the Knesset,” describing the budget as “a collection of lowly thieves who are disconnected from the people, who are looting the citizens of Israel while they’re in bomb shelters.”

Other Key Budget Elements
The Education Ministry is slated to receive just over NIS 97 billion ($30.9 billion) for the school system, plus about NIS 14.9 billion ($4.7 billion) for higher education. The National Insurance Institute will receive some NIS 64 billion ($20.3 billion), and the Health Ministry roughly NIS 63 billion ($20 billion).

Lawmakers also passed the 2026 Arrangements Law, which determines how funds will be disbursed, and the Deficit Reduction and Budgetary Expenditure Limitation Bill, raising the deficit ceiling for 2026 to 4.9% of GDP from the previously planned 3.9%.The vote followed more than thirteen hours of filibustering by the opposition.

Political Context and Reactions
The passage of the budget ensures the current right-wing coalition can serve out its full term. Smotrich declared that anyone voting against it was voting “against Israel’s security, against tax relief for working people, and against taxation of the banks.”

Prime Minister Benjamin Netanyahu and other coalition leaders expressed satisfaction with the outcome, while opposition parties continued to denounce what they called disproportionate funding for narrow sectoral interests at a time of national emergency and economic strain caused by the ongoing war with Iran.

The budget was approved in an atmosphere of heightened security, with proceedings moved to a fortified room due to repeated missile alerts from Iran.

As Israel continues its military campaign against Iran, the record defence spending reflects the government’s determination to sustain prolonged operations. However, the significant allocations to Haredi institutions have intensified criticism that the coalition is prioritising political deals over broader national needs during wartime.

The outcome marks a significant political victory for the coalition but is likely to fuel ongoing debates about fiscal priorities, conscription policy, and the distribution of public resources in Israel.