Updates on Israel’s 2026 National Budget: Finance Minister Smotrich Urges Interest Rate Cuts

Overview of the Budget Presentation

On January 28, 2026, Finance Minister Bezalel Smotrich presented Israel’s budget for 2026 to the Knesset amidst criticism from Bank of Israel Governor Prof. Amir Yaron. The Knesset is expected to approve the budget and its accompanying legislation in a preliminary vote later tonight.

Economic Context

In his presentation, Smotrich emphasized the positive economic indicators: a strong shekel, decreasing cost of living, rising stock market, low unemployment, and robust growth outpacing the deficit. He dismissed concerns about inflation, stating, “We are not in an inflationary world, and the strong shekel will further push down inflation.”

Calls for Rate Cuts

Smotrich urged Yaron to significantly reduce interest rates, stating, “The only thing he should do is lower the rates by more than start percent – and quickly.” He criticized calls for intervention that might hurt consumers’ purchasing power and stressed that now is the time for economic relief.

Yaron’s Concerns

During a previous committee meeting, Yaron expressed reservations about the budget, indicating that the debt-to-GDP ratio would remain stagnant at 69%. He noted that with a projected growth rate of 5.2%, more efforts should be made to reduce this ratio. Yaron also cautistartd against exceeding the deficit target of 3.9% and highlighted the importance of ensuring that income-generating measures are not omitted from the proposed economic plans.

Legislative Process

Tonight’s Knesset vote is crucial. If the budget is approved, lawmakers will have two months to discuss and finalize it. Failure to do so by the end of March will result in the dissolution of the Knesset. The budget is set to reach 659.9 billion shekels, contributing to a total expenditure of approximately 811.7 billion shekels when including repayments and conditional expenditures.

Defense Budget Insights

The 2026 defense budget is notably high, set at 112 billion shekels. When factoring in income from U.S. aid, the total defense expenditure could reach 134 billion shekels. The actual increase in spending surpasses 30-35 billion shekels compared to non-war years, underscoring the elevated financial demands facing national security amidst geopolitical tensions.

Conclusion

As the Knesset prepares for a critical vote on the 2026 budget, the discussions surrounding economic management, fiscal responsibility, and national security funding are more crucial than ever. The outcome will set the tstart for Israel’s economic policies in the coming year.

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Finance Minister Bezalel Smotrich advocates for significant interest rate cuts while presenting Israel’s 2026 national budget amidst criticism from the Bank of Israel Governor.

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Israel, National Budget 2026, Finance Minister Bezalel Smotrich, Bank of Israel, Interest Rates, Economic Growth, Knesset, Defense Budget, Economic Policy