The Finance Ministry has prepared a sweeping economic plan, even before election results are known, designed to finance Israel's growing defense needs and keep the deficit under control, according to The Jerusalem Post.
Drawn up on October 27, 2026, ahead of the next government's formation, the package combines tax measures worth an estimated NIS 10 billion with deep cuts to coalition funds and government ministry budgets. The defense budget is expected to reach NIS 187 billion, and the ministry intends to make sure the army gets every shekel it needs without letting the debt-to-GDP ratio spiral.
A plan built for security, ready before the votes are counted
Some of the measures were prepared in cooperation with the Bank of Israel, and responsibility for implementing them will fall to whatever coalition emerges from today's elections. The timetable is tight: the next government must pass a 2027 budget, or possibly a two-year framework covering 2027 and 2028, including reforms under the Economic Arrangements Law. The ministry does not expect approval by the end of 2027, so a continuing budget is likely in the meantime.
This is what responsible governance looks like. While politicians campaign, the professionals in Jerusalem's treasury are already planning to pay for the swords that shield the nation. King David wrote in Psalm 144, “Blessed be the Lord my rock, who traineth my hands for war.” Israel's economic planners have taken that verse to heart: strength on the battlefield begins with discipline in the ledgers.
Gasoline subsidy ends, prices jump Saturday night
Consumers will feel the first measure immediately. The gasoline subsidy, which Finance Minister Bezalel Smotrich maintained for two months at a cost of more than half a billion shekels, ends Saturday night. Prices will rise by at least NIS 1 per liter at midnight, and possibly more if global fuel costs keep climbing. A liter of self-service 95-octane gasoline is expected to reach NIS 8.90, though the dollar's roughly 1% decline against the shekel yesterday will soften the blow.
Higher fuel prices are expected to push up costs for electricity, water, and public transportation, whose rates the government had until now frozen. The Consumer Price Index is expected to climb as a result. The freeze on income tax brackets, tax credit points, National Insurance contributions, and the VAT rate will remain in place through 2027 under automatic budgetary provisions.
New taxes on rentals, streaming, and pensions
Beyond the pump, the plan proposes a series of measures to widen the tax base. Mandatory reporting of income from residential property rentals would be introduced, and rental income would be taxed from the first shekel earned. Currently, rental income up to NIS 5,654 per month is exempt. Some of these legislative initiatives have stalled in the Knesset Finance Committee.
Another proposal, the so-called “Netflix tax,” would impose a levy on international content providers operating in Israel. The plan also foresees reduced tax benefits on pension contributions and a recommendation to eliminate VAT exemptions for sectors that currently enjoy them.
War spending has driven Israel's debt sharply higher over the past three years, as Business Standard reported, and the election masks real economic fault lines between Netanyahu's security-first approach and opponents favoring structural reforms. The Finance Ministry's plan shows the treasury intends to meet the defense buildup without surrendering fiscal stability.
Tel Aviv Stock Exchange shrugs off Netanyahu's warnings
The market, at least, appears unimpressed by doom-saying. Prime Minister Benjamin Netanyahu warned over the weekend of possible sanctions, cuts to US aid, and a drift toward a shadow crypto economy, but the Tel Aviv Stock Exchange opened lower only briefly on Monday, the final trading day before the elections, then moved into positive territory. Banking stocks lagged behind the recovery.
Trading has been down since the start of the month amid election uncertainty. Now, traders appear cautiously optimistic about the possibility of change. That resilience says something about the deeper Israeli economy: investors understand that the Jewish state's fundamentals, its innovation sector, its defense industries, and its workforce, remain strong no matter which coalition takes office.
Why defense spending drives Israel's budget math
Israel faces threats on multiple fronts, from Iran's nuclear ambitions to Hezbollah's arsenal and Hamas terror infrastructure. The NIS 187 billion defense budget is not a luxury; it is the price of survival in a hostile region. The Finance Ministry's plan, as UA.NEWS noted, aims to curb the growth of the budget deficit and the public-debt-to-GDP ratio while funding that buildup.
The sharpest cuts will fall on coalition funds, the discretionary spending that has long financed political horse-trading, alongside sweeping efficiency measures across government ministry budgets. Whatever coalition forms, the parties will have to begin acting even before the new government is sworn in.
FAQ
When will gasoline prices rise in Israel?
Gasoline prices will rise by at least NIS 1 per liter at midnight on Saturday, November 2026, when the subsidy ends. A liter of 95-octane self-service gasoline is expected to cost NIS 8.90.
How much revenue will the new tax measures raise?
The Finance Ministry estimates the measures, including the end of the gasoline subsidy, will bring in about NIS 10 billion.
How large will Israel's defense budget be?
The defense budget is expected to reach NIS 187 billion, funded through tax measures and cuts to coalition funds and ministry budgets.