Israel’s Need for $8 Billion of Extra War Funds Leads to Election Showdown

Prime Minister Benjamin Netanyahu’s government is struggling to strike a deal to unlock the money before next month’s election.

Originally published by  Bloomberg News

Prime Minister Benjamin Netanyahu’s government is struggling to strike a deal to fund the Israeli military’s request for $8 billion before next month’s election.

Israel’s military is seeking about $8 billion in additional funding, but Prime Minister Benjamin Netanyahu’s government is struggling to strike a deal to unlock the money before next month’s election.

Netanyahu this week failed to secure opposition leader Yair Lapid’s support to allocate 25 billion shekels ($8.2 billion) in extra funding to the military, whose finances have come under strain from almost three years of fighting in Gaza, Yemen, Lebanon and Iran, according to people familiar with the matter. They asked not to be identified because of the sensitivity of the issue.

After the meeting, Defense Minister Israel Katz appealed to Lapid to “support the IDF’s urgent request.” The extra funds are needed, he said, to pay reserve soldiers, protect Israeli border communities, and procure munitions.

“We face dramatic security challenges that require decisions and actions right now,” Katz said. “It would be wrong to tie the issue of security to the standard political debate with the government over various budgetary items.”

Netanyahu’s office and a spokesman for Lapid declined to comment. The Israel Defense Forces didn’t immediately respond to a request for comment.

The showdown is part of political maneuvering between the government and opposition ahead of the election scheduled for Oct. 27. The proposal would bring this year’s defense spending to about 183 billion shekels, or around 9% of Israel’s gross domestic product, one of the highest globally.

Military outlays have surged as Netanyahu’s government adopted a more preemptive military doctrine in the aftermath of the 2023 attack by the Iran-backed militant group Hamas — designated a terrorist organization by the U.S. and much of the West — that triggered the war in Gaza and spilled over onto the wider region.

The opposition supports increasing military spending, though wants some expenditure cuts to balance the impact on the budget, one person close to the opposition leader said.

Lapid asked the government to scrap so-called coalition funds — which are estimated to cost about 5 billion shekels in 2026 — the person said, adding that Netanyahu rejected clamping down on those handouts. Those funds support his political allies, including the country’s ultra-Orthodox Jewish community.

Fallout visible

The failure to reach a compromise is putting pressure on military operations conducted by the IDF. It controls about 60% of the Gaza Strip and is occupying parts of Lebanon and Syria.

Netanyahu already approved a 15-billion-shekel budget supplement for the IDF in June. The other 25 billion shekels would be allocated following reviews over the next two months, two of the people said.

With Israel’s parliament in pre-electoral recess, any new funding would likely need to be legally signed off by the opposition.

Some of the fallout is already visible. Air-defense stockpiles need replenishing, one of the people said, noting that rebuilding those stocks requires multiyear contracts. The U.S., which started this year’s war against Iran alongside Israel, has also seen its stocks of high-end munitions drop significantly, according to several analysts.

Israeli defense firm Elbit Systems Ltd. expects to shut down some production lines for tank rounds and other ammunition because of the government’s inability to sign new contracts, the same person said.

The Finance Ministry was forced to delay payments to some local defense companies, including Elbit, Israel Aerospace Industries and Rafael Advanced Defense Systems Ltd., according to one of the people, who didn’t elaborate on the amount currently owed to those firms.

Elbit, IAI and Rafael either declined to or didn’t immediately respond to requests for comment on the late payments.

Earlier this year, Netanyahu sought to advance a 12-year military buildup plan at a cost of as much as 400 billion shekels. The program is aimed at making Israel more self-sufficient for its defense needs. It’s expected to start next year, but that may depend on the election results.

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