Annual defense budget and spending in Israel 2017-2025

Israel's projected defense budget for 2025 has increased remarkable, registering 108 billion Israeli shekels (approximately 30.5 billion U.S. dollars), an 80 percent increase relative to 2022. This substantial elevation in defense expenditure mirrors Israel's sharpened focus on military readiness, a shift in national priorities prompted by the Israel-Hamas conflict that began in October 2023. However, there is a slight pullback in the defense allocation compared to 2024, suggesting that Israel's budget planners are anticipating less armed conflict.

Conflict driving a surge in government spending

The increase in military spending is part of a broader trend of elevated state expenditure due to the war in the Middle East. During the first quarter of 2024, government consumption in Israel reached over 123 billion shekels (about 32 billion U.S. dollars), marking a 27 percent increase compared to the same period in 2023. This bump in public spending has been largely driven by defense, but also welfare and compensation payouts to those impacted by hostilities.

Growing national debt

The ramifications of increased military spending are evident in Israel's national debt figures. By the first quarter of 2024, general government debt had swelled to over 1.2 trillion Israeli shekels (about 336 billion U.S. dollars). This represented a 10 percent increase in just six months. The escalation in debt levels underscores the financial strain of sustaining heightened military expenditure, which reached 5.3 percent of the country's gross domestic product in 2023.