Israel's cabinet approves 2026 budget with a hefty $35 billion for defence

JERUSALEM (Reuters) - Israel's cabinet has approved the 2026 state budget, the prime minister's office said on Friday, including 112 billion shekels ($35 billion) for defence, an increase from the 90 billion shekels budgeted in an earlier draft.

The budget now heads to parliament for an initial vote and will face an uphill battle for approval as Israel's government has become increasingly polarized. By law it must be approved by March or an election would be triggered.

The past two years has seen parties in the ruling coalition splintering over the war in Gaza, the ceasefire that has halted it, and demands by ultra-Orthodox Jewish parties to exempt Jewish seminary students from mandatory military service.

Ministers began a marathon session on Thursday, and Defence Minister Israel Katz's office announced the rise in the budget for the Israeli Defence Forces on Friday.

"We will continue to act decisively to reinforce the IDF and to fully address the needs of the fighters and to reduce the burden on reservists - in order to ensure the security of the State of Israel on every front," his office quoted him as saying.

The Gaza war has been costly for Israel, which spent $31 billion in 2024 on its military conflicts with Hamas and with Hezbollah in Lebanon.

Israel has since agreed ceasefire deals with both the groups.

Finance Minister Bezalel Smotrich's office said that the 2026 defence budget had seen an increase of 47 billion shekels compared with 2023, on the eve of the war.

"We are allocating a huge budget to strengthen the army this year, but also one that allows us to return the State of Israel to a path of growth and relief for citizens," Smotrich said, according to his office.