Israeli parliament approves 2026 state budget, spokesperson says

Israel's parliament approved the 2026 state budget, a Knesset spokesperson said in a statement early on Monday, allowing Prime Minister Benjamin Netanyahu's government to head off early elections as his country's joint war with the U.S. on Iran continues.

The approval of the defence-heavy 699-billion shekel budget comes a month into the war, with Israel also fighting against Hezbollah in Lebanon and its cost to the economy standing at about $1.6 billion a week.

Failure to approve the budget would have likely triggered a snap election within 90 days, which opinion polls so far have predicted Netanyahu would lose.

The election is due in late October though a date has yet to be set. Netanyahu has said it could be held in September.

The budget's last-minute passage removes a key overhang for Israel's financial markets and economy, which has been operating since the start of the year on a pro-rated 2025 budget.

By adding another 32 billion shekels for defence, the budget deficit target was raised to some 5% of gross domestic product.

This has raised the prospects of inflationary effects that will also continue to prevent a return to responsible fiscal policies while preventing further interest rate reductions.