ISRAEL, November 14, 2026 – Israel’s public finances have deteriorated once more. At the end of October 2026, the government’s 12-month rolling deficit stood at 3.3% of GDP, compared to 3.2% in the previous month, as reported by Michal Abadi-Boiangiu, Israel’s Accountant General of the Ministry of Finance.
The figure itself may not be impressive, but the trend certainly is. In a budget year marked by high defense expenditure, unpredictable security expenses, and a maximum deficit of 4.9%, any increase in the deficit is worth noticing.
What changed in October
The deficit for October stood at approximately NIS 18.3 billion, which means a 20% increase compared to last October when the deficit stood at NIS 15.2 billion.
Where did the money go? Mostly on the same thing it has been spent on throughout the year: defense. The expenditure on the Ministry of Defense grew by 9.9% compared to the previous year, while the budget forecasted an increase of only 2.7%.
This gap isn’t an insignificant one. It represents the difference between a budget that is based on certain assumptions and a reality in terms of security conditions that keep changing. The Bank of Israel has pointed out that any increase in defense spending without any corresponding reduction can push the deficit even higher.
Revenue is not the problem
Here’s the twist: tax collection has been strong.
October State income was NIS 46.2 billion. The cumulative revenues during January to October were NIS 503.3 billion compared to NIS 457.6 billion during the same period last year, representing an increase of 10%.
Income taxes alone have increased by 8% in real terms during the first ten months. Direct income tax rose by 11%, indirect income taxes by 4%, and fees by 10%.
So this is definitely not a story of a State which cannot get its collection together. This is the story of expenditures outgrowing even good performance of the State revenues. Expenditures in October stood at NIS 64.5 billion, while the year-to-date expenditures reached around NIS 551.1 billion compared to NIS 529.1 billion during the same period a year ago.
The NIS 74 billion question
Over the past 12 months, Israel’s cumulative deficit stands at NIS 74 billion.
This figure is significant since it dictates how much money will need to be borrowed by the government, how much interest it needs to pay, and the degree of flexibility available if another bond emerges or any economic disruption takes place. The debt-to-GDP ratio in Israel is projected to remain at 68% toward the end of 2026.
The central bank projects that this deficit will fall below the level set at 4.9% of the gross domestic product, to 4.4%, but the projections depend on the fact that defense expenditures will not exceed the amount reserved for it.
That assumption is looking fragile.
A familiar fiscal squeeze
But the bigger picture is troubling, though not entirely new. According to the International Monetary Fund, while Israel’s 2026 approved budget had a projected deficit of 4.9% of GDP, the rise was mainly due to increased defense outlay, which was estimated to be about 1.5% of GDP.
However, the economists are divided on whether there is enough room. While some say that Israel enjoys the benefit of more than expected tax collection, others feel that it is just an example of how fiscal discipline gets ruined by taking temporary revenues as permanent capacity to spend.
There is another, less talked about, point that emerges from the above figures: while economic ministries underspent by 2.8% in October, their plan was for a 12% rise in expenditure.
Why it matters locally
The deficit doesn’t mean much to most people because they don’t look at Treasury spreadsheets. The deficit affects interest rates, the ability of the government to fund its services, and decisions on taxation and spending cuts.
Depending on whether revenues continue to be strong, Finance Ministry people might be able to keep their heads above water without taking drastic actions. But if military expenses keep climbing, then somebody will have to pay the piper.
What will happen is hard to tell, but what is certain is that Israel came into November with a larger deficit, higher defense costs, and less room for maneuvering than a month ago.
And that, frankly, is the part worth watching.
