Israel Faces Risk of No 2027 Budget Approval

The government has not yet begun preparing the 2027 state budget proposal, with the deadline for submission to the Knesset having passed. The final two months of 2026 were supposed to be devoted to determining an appropriate budgetary framework for a country emerging from war, one that requires reforms to return to a path of growth and adapt to rapid technological change.

If no budget is approved by the end of 2027, the government would be forced to operate under a continuing budget based on the previous year's allocations. This mechanism would allow spending based on the previous year's budget, adjusted for population growth, but would significantly limit available funds.

The 2026 budget was set at approximately NIS 699 billion, but due to a Deficit Reduction Law, only NIS 633 billion is considered for calculating the continuing budget. Adjusted for population growth, the available amount rises to NIS 642 billion, still falling short of the full 2026 budget.

The government's actual obligations for 2027, including defense and other commitments, are estimated at around NIS 720 billion, nearly NIS 80 billion more than what would be available under the continuing budget. This creates a severe financial constraint, with ministries facing uncertainty about funding for ongoing programs.

The continuing budget would restrict the government's ability to fund new initiatives or maintain existing programs. The Accountant General's Division at the Ministry of Finance must prepare for a continuing budget lasting six months or longer.

While a continuing budget could help reduce the deficit and national debt, it risks sidelining civilian programs and delaying necessary reforms. The government may still find a way to meet its obligations, but the lack of a formal budget could lead to significant financial strain and uncertainty throughout the year.