What's Happening?
The Israeli government has approved the 2026 state budget, which totals 662 billion shekels, marking an increase of 40 billion from the initial proposal. This approval follows a resolution between the Finance and Defense Ministries over defense allocations,
setting the defense budget at 112 billion shekels. The budget also includes significant allocations for public transportation, education, and dairy sector reforms. Despite opposition, the government plans to double the tax-free threshold for online imports and maintain the VAT exemption for tourists. The budget aims to support economic growth while avoiding tax hikes.
Why It's Important?
The approval of this budget is crucial for Israel's economic stability and growth. By increasing defense spending, the government aims to strengthen national security, which is a priority given the regional geopolitical tensions. The focus on public transportation and education reflects a commitment to improving infrastructure and human capital, which are vital for long-term economic development. The decision to maintain the VAT exemption for tourists is expected to support the tourism sector, which has been struggling. These measures collectively aim to balance fiscal responsibility with economic growth and social welfare.
What's Next?
With the budget now approved, the Israeli government will focus on implementing the various initiatives outlined, including the controversial dairy sector reforms and the expansion of public transportation. The government will also monitor the impact of the increased import threshold on local businesses. Stakeholders, including industry groups and civil society, will likely continue to engage with the government to influence the implementation of these policies. The success of these initiatives will be critical in shaping Israel's economic landscape in the coming years.
