Israel Faces Fierce Disagreement Between Finance and Defense Ministries Over War Costs

The Israeli Finance and Defense Ministries are locked in a deep conflict over the rising costs of the country's ongoing regional wars, adding significant pressure to the government budget. The Israeli military has warned that if the dispute is not resolved, the nation's security could be compromised.

Since the war in Gaza began in October 2023, Israel has experienced its longest continuous period of conflict in its history. Israeli forces are deployed in Lebanon and Syria, continue to occupy Gaza and the West Bank, and are preparing for potential further confrontation with Iran. The Israeli military's Chief of Staff, Lieutenant General Eyal Zamir, warned that these wars are being fought with an “empty treasury.”

Defense budget nears record high

The Israeli government has attempted to inject an additional 15 billion shekels ($5 billion) into the military, according to YNet news. This addition would raise the 2026 defense budget to 184 billion shekels ($60.8 billion), a near-record high in the country's history, just below the 188 billion shekels ($62.2 billion) spent on the military during the first year of the Gaza conflict. Despite this, tensions between the Defense Ministry and the Finance Ministry continue to escalate, as the two sides deeply disagree over the scale and management of military spending.

According to YNet, senior Finance Ministry officials reject the military's claims that it is “on the brink.” They warn that if the military's demands were fully met, defense spending could account for nearly a third of the entire state budget.

“Everything costs money. Their only mode of operation is force, as we have seen in Lebanon, Syria, Gaza, and Iran, but they never seem to want to talk about paying for it,” Yossi Mekelberg, a senior consulting fellow at Chatham House, told Al Jazeera. “Weapons, ammunition, soldiers, and compensation for injuries—all need to be funded, which they rarely want to discuss.”

Difficult position for Finance Minister Smotrich

Israel's fragmented political landscape complicates the picture, according to Mekelberg. Politicians compete for small, uncompromising constituencies who see little benefit beyond their own interests. This is especially true for Finance Minister Bezalel Smotrich, leader of the far-right Religious Zionism party, which might not pass the electoral threshold to enter the upcoming Knesset (Israeli parliament).

“Smotrich is in a difficult position. On one hand, he needs the support of hardline nationalists who demand increased military spending and support the occupation of the West Bank. On the other hand, as Finance Minister, he has to find ways to pay for it,” Mekelberg said.

Blame game between ministries

Closed-door meetings within the Israeli military blame Finance Ministry delays for a series of planned cuts to military spending, including sharp reductions in reserve forces in the Northern and Southern Commands. Meanwhile, the West Bank Division is maintained at its current level despite heightened security tensions following a wave of settler violence against Palestinians in the occupied territory.

The Israeli military also warns of significant cuts to intelligence gathering, which relies on expensive technology. At the same time, the military must prepare for potential escalation with Iran and other threats such as the Houthi forces in Yemen and Iran-backed Shia militias in Iraq. All of these require continuous training costs and large amounts of spare parts and ammunition.

Michael Ben-Gad, a professor of economics at City St George's University in London, commented: “Embattled agencies often blame the Finance Ministry for their problems, much like governments in developing countries sometimes blame the IMF. The Finance Ministry will ensure the military is funded. Most ministry staff have family in the military or have served themselves.” The political difficulty, especially with elections approaching, is having to show support for the military.

“Smotrich could pay now and raise taxes after the election, or pay now and then criticize the next government for doing it,” Ben-Gad analyzed.

Preparing for future wars

Few ministers appear willing to restrain Israel's military operations, despite warnings about an “empty treasury.” In the West Bank, the Israeli military has announced plans to deploy large-scale forces to prevent settler violence, which many in the government are accused of encouraging. Meanwhile, Israel is preparing for potential escalation with Iran. Billions of dollars are being spent to replenish ammunition stockpiles used in the recent war with Iran and its neighbors.

“It's like a law of nature. Every year the Israeli military asks for more money, and that year the Finance Ministry cuts about 1-2% of spending from all other ministries to make up for it,” Israeli political analyst Nimrod Flaschenberg told Al Jazeera. “A new military doctrine is emerging, where the Israeli military establishes front lines on enemy territory, with 'dead zones' behind them.”

“If this is the new doctrine, it could be very expensive, as those front lines will need to be replenished with both personnel and equipment. There may be disagreement over how to implement it, but no one opposes the doctrine of force building,” Flaschenberg added.