Israel's Financial Report Reveals 231 Billion Shekels in Direct War Costs
The Accountant General's new financial report reveals that direct war expenditures totaled 231 billion shekels between 2023 and 2025, permanently shifting Israel's defense budget to roughly 8% of GDP and driving historic increases in compensation and reconstruction outlays.
The Accountant General has published the financial reports of the State of Israel, a comprehensive 470-page document detailing the assets and liabilities of all government ministries, statutory corporations, and state-owned companies. Spanning financial data from 209 bodies, the report primarily serves to enforce internal accounting discipline across the public sector. While most entities now hold audited statements, notable exceptions remain, such as the Ministry of Defense, which currently operates with unaudited draft reports—a situation the Accountant General's department is actively working to reform.
A central focus of the new document is its exhaustive breakdown of war expenditures. Between 2023 and 2025, the government allocated approximately 231 billion shekels directly to the conflict, excluding 2026 outlays and uncollected tax revenues. This spending is categorized into three main pillars: defense (166 billion shekels), compensation (27.3 billion shekels), and reconstruction alongside various civilian expenses (37.9 billion shekels).
Defense Spending Surges to Record Highs
The broader defense budget, which stood at 75 billion shekels (4.3% of GDP) in 2022, escalated sharply to 98 billion in 2023, 168 billion in 2024, 166 billion in 2025, and at least 158 billion shekels for 2026. Consequently, defense expenditures now hover around 8% of GDP. Of this surge, the Accountant General classifies 166.2 billion shekels specifically as war-related defense costs.
A closer examination of the defense budget reveals structural shifts. Expenditures for wounded IDF soldiers and bereaved families reached 11 billion shekels in 2025 and are projected to climb to 13.9 billion in 2026, compared to just 7.3 billion in 2023. Similarly, IDF personnel costs rose from 31 billion shekels in 2023 to 36.5 billion in 2025. Meanwhile, reserve duty expenses spiked dramatically from 8.7 billion shekels in 2023 to 37 billion in 2024, remaining elevated at 32 billion in 2025.
The expectation that the defense budget will experience significant cuts is an illusion; we must adapt to permanently expanded defense outlays, with the security establishment targeting a baseline of 117 billion shekels for 2027.
Ninefold Increase in Hostilities Victim Allowances
Humanitarian and civilian costs have also witnessed unprecedented growth. Annual payouts by the National Insurance Institute (Bituach Leumi) for victims of hostilities surged from roughly half a billion shekels pre-war to 1.5 billion in 2023, 2.5 billion in 2024, and 3.6 billion in 2025. Hostility-related disability allowances alone skyrocketed ninefold, from 200 million to 1.7 billion shekels annually.
Statistically, the toll remains severe: since October 7, approximately 119,000 claims have been filed with the National Insurance Institute, with 87,000 recognized. As of September 2026, the recorded casualties include 1,024 civilian fatalities, 298 widows and widowers, 1,201 bereaved parents, and 1,199 orphans, including 120 who lost both parents.
Compensation Funds and Regional Reconstruction
Property tax compensation funds disbursed approximately 27 billion shekels by the end of 2025 for direct and indirect war damages, a figure that climbed to 37 billion by September 2026, leaving a mere 2.8 billion in reserve. Accountant General Michal Abadi-Boiangiu expressed satisfaction with the emergency tax fund model allowing extra-budgetary flexibility, though concerns remain that reserves could deplete entirely before the 2027 budget.
Reconstruction efforts are channeled through dedicated administrations. The Tkuma Directorate was allocated 17.5 billion shekels through 2028, having committed 11.6 billion and disbursed 5.4 billion by the end of 2025. Meanwhile, the northern reconstruction framework, formalized as the "Tnufa la-Tsafon" administration with 29 personnel, was bolstered by a multi-year development plan adopted in June 2026 carrying an additional budget of 6.6 billion shekels.
