Israel has spent three years arguing bitterly about fairness: who fights, who sacrifices, and who is protected. When the Knesset passed its largest-ever budget at the end of March, under missile sirens, in a fortified auditorium, many Israelis saw those arguments reflected back at them yet again, as the coalition slipped nearly a billion shekels ($330 million USD) to Haredi (Ultra-Orthodox) institutions through a procedural move that opposition lawmakers didn’t notice until it was too late.

At NIS 850 billion ($280 billion USD), this is the largest budget in Israel’s history, coming as the state is already struggling with increased costs from the almost constant state of war since 2023.

The Defense Ministry received a substantial increase of NIS 30 billion ($10 billion USD), with its new budget amounting to NIS 143 billion ($47 billion USD). 

The budget also includes nearly NIS 6 billion ($2 billion USD) in “coalition funds.” Because Israeli governments are almost always built from a coalition of multiple parties, the largest party must negotiate agreements with smaller ones to secure their support. Coalition funds are the price of those agreements: money set aside for the priorities of specific parties, largely shielded from public scrutiny and the spending constraints that apply to the rest of the budget. In the latest budget, these funds include money for Haredi yeshivot, programs to keep Haredi youth within their communities, and budgets for West Bank settlements — allocations that critics argue serve narrow political constituencies rather than the broader public, and that survived the budget process intact even as ministries serving all Israelis absorbed cuts.

During the vote, the government added a substantial budget of over NIS 800 million ($264 million USD) for Haredi institutions through a surprise “reservation” to the agenda. These reservations are usually filed by the opposition to demand changes to certain parts of a law or to delay votes. Shortly after midnight, the coalition used the tool to add the budgets to the law. Since the opposition was used to such reservations being standard procedure, many MKs voted yes before realizing what they were voting for.

The coalition’s move sparked immediate outrage. “This isn’t a budget — it’s a robbery,” opposition leader Yair Lapid told the Knesset plenum before the vote. “The Israeli public is not stupid. It understands that this budget is a bonanza for the corrupt and for draft evaders who are celebrating at our expense.”

Former prime minister and current candidate Naftali Bennett described the maneuver as “a dark trick…in the middle of the night.”

“They took from us, the serving and working public, another NIS 800 million, and transferred it to Haredi institutions that educate people to ‘die rather than enlist,’” Bennett added. The slogan he referenced is often used at Haredi protests against the draft.

He warned that the budget “punishes those who serve and work, and rewards those who choose to evade the draft, and not to work.” He also referenced the difficulties reservists and their families have faced due to the war, as well as the struggles border communities face in rebuilding without sufficient funds.

Finance Minister Bezalel Smotrich defended the budget, arguing that the government was “acting responsibly” and that “war has high costs, and we are managing them carefully.” The finance minister also noted that the budget included tax relief for middle-class Israelis, as well as tax benefits for reservists and new immigrants.

A spokesman for MK Moshe Gafni, a member of the Haredi United Torah Judaism party, was less apologetic, boasting about the maneuver to The Times of Israel and comparing it to the pager operation carried out against Hezbollah in 2024.

“To tell you the truth, regarding the opposition, we were really worried someone there would discover it, but apparently, we thought they were more talented than they actually are. How did they not find it? I don’t know. We tucked it inside the pages. They didn’t even bother to go over it,” the spokesman said.

Why is a budget for yeshivas so controversial?

At the heart of the controversy is a tension that has shaken Israeli society for years: the question of drafting Haredim to the IDF.

Haredi Jews make up roughly 11–14% of Israel’s population, and live largely apart from mainstream Israeli life. They have their own schools, their own neighborhoods, and their own internal authority structures built around rabbinic leadership. Around 45% of Haredi men do not join the workforce, and the vast majority do not serve in the military. Instead, their young men have historically been exempt from the mandatory military service that applies to most other Jewish Israelis, on the grounds that full-time Torah study constitutes its own form of national contribution, a spiritual defense of the Jewish people no less vital, in their view, than a physical one.

30 October 2025, Israel, Jerusalem: Ultra-Orthodox Jewish protesters gather in Jerusalem to demonstrate against the drafting of young men from their community into military service. (Photo by Ilia Yefimovich/picture alliance via Getty Images)

That belief is not merely rhetorical. For Haredi leaders, military service represents an existential threat to their way of life. The Israeli army is a mixing pot of the entirety of Israeli society, and the fear, held with deep sincerity, is that young Haredi men immersed in its culture would be pulled away from their strict form of religious observance, their identity eroded by exposure to a world their communities have spent decades carefully walling out. Haredi society is built on conservatism and strict boundaries between its world and everything beyond those fences, governing education, culture, food, media consumption, clothing, and housing, all determined by rabbinic authority. Military service, in this view, would mean surrendering that authority to the secular state. Senior Haredi leaders in many communities have issued formal rulings declaring IDF enlistment “strictly forbidden by Torah law,” arguing that military frameworks “aim to alter the character of the Torah-observant public.” Many leaders have even rejected the idea of allowing young men who aren’t studying in yeshiva to draft.

The arrangement dates back to the state’s founding, when Israel’s first prime minister, David Ben-Gurion, agreed to exempt a few hundred students. Since then, however, the number of exempt young men has ballooned to tens of thousands, meaning a substantial potential source of manpower sits outside the military altogether, by some estimates, around 80,000 men of eligible age.

(For a deeper dive into the draft debate, check out our article here.)

For many non-Haredi Israelis, the blanket exemption has always felt like an injustice, with several attempts made over the past few decades to find a better balance. Many Israelis value recognizing Torah study as a form of service, but not as a blanket exemption on the scale it currently stands at, with tens of thousands of young men receiving exemptions each year.

Since October 2023, and the long war that followed, that feeling of injustice has become an open wound. Hundreds of thousands of reservists — ordinary civilians, parents, business owners, students — have been called up repeatedly, some spending the better part of two years in uniform. Livelihoods have suffered, families have been stretched to the breaking point, and throughout, the Haredi sector has largely continued life uninterrupted.

The societal divide runs deep. “We have prayer, we have a minyan, we have all the things,” one reservist, a 35-year-old religious soldier who had served multiple combat tours, told the Jerusalem Post. “And we are serving, and we are working, and we are fighting, and we are dying — and they are not.”

The courts have repeatedly ruled the blanket exemption unlawful due to violations of the right to equality. Additionally, the budget controversy came just days after IDF Chief of Staff Lt.-Gen. Eyal Zamir warned that the IDF will “collapse in on itself” unless the government passes a law that drafts more soldiers, as well as laws to increase reserve duty and extend mandatory military service.

“Before long, the IDF will not be ready for its routine missions, and the reserve system will not last,” Zamir told the government. IDF Spokesperson Brig.-Gen. Effie Defrin explained that the IDF needs about 15,000 additional soldiers, including about 7-8,000 combat soldiers, in light of the expanded range of missions the IDF now faces in Lebanon, the West Bank, and Gaza.

However, the government, which depends on Haredi political parties to hold its coalition together, has consistently shielded the community from the draft. The approved budget, with its billions for Haredi institutions and its cuts to welfare, health, and border rehabilitation, felt, to many Israelis, like the latest chapter in the same story: the burden shared unequally, and the bill sent to those least able to refuse it.

A poll taken by the Israel Democracy Institute at the end of March found that 55% of Israelis believe that the decision to transfer large budgets to Haredi institutions and delay passing a law that would draft Haredim was a political deal that prioritized sectoral interests over the general public welfare. Less than a quarter (23%) said they believed it was a responsible decision to manage the war and stabilize the economy, while 11% said it was both a political and a responsible decision.

While 51% of Haredi respondents said they believed this was a responsible decision, nearly a quarter (22.5%) responded that they were unsure, and 18% said it was a political deal. 

Beyond the draft debate

The controversy extended beyond the draft debate. It also diverted significant funds from essential services to budgets many Israelis feel are less crucial, while weakening Israel’s economic resilience for the future.

The increased budget allocation for coalition funds and the defense budget led to cuts of tens of millions of shekels from the Welfare Ministry, the Health Ministry, the education budget, and funding for science, culture, and sports.

Also cut was NIS 150 million ($50 million USD) earmarked for communities along the Lebanese and Gaza borders, including towns and villages that spent the better part of two years under rocket and missile fire and sustained severe damage. For those communities, the cut carried a particular sting: the people who bore the most direct physical cost of the wars will see their recovery funds redirected, in part, to sectoral political agreements.

As part of the budget, the government also presents a deficit ceiling, a limit on the gap between what it spends and what it collects in taxes and other revenue. This is meant to rein in government spending, preventing it from spending too much more than it earns.

The new budget sets the ceiling at an already high 4.9%, but financial experts have warned that government spending will almost certainly exceed that limit due to the war and coalition agreements. Part of the problem is that the Israeli economy isn’t expected to grow as much as the government predicts. That means less government income and a wider gap if spending remains the same or increases. The Bank of Israel, for example, has projected that the deficit will reach 5.3%.

Why does this all matter? A higher deficit ceiling means the government’s debt will rise, and that has long-lasting effects. When the government spends more than it earns, that extra cash has to come from somewhere, usually from loans. And loans need to be paid back with interest. That interest is money essentially being thrown away, funds that could have gone to education, healthcare, or any other government service, instead have to be diverted to pay off older debts.

Rising debt doesn’t just strain the budget; it also affects how the rest of the world sees Israel as a borrower, making borrowing more expensive. Since the outbreak of war in 2023, all three major international credit rating agencies — Fitch, Moody’s, and S&P — have downgraded Israel’s credit rating, citing rising public debt, widening deficits, and geopolitical instability, and all three have maintained a negative or cautionary outlook since.

In late March, Fitch issued its latest negative credit outlook for Israel, again citing the country’s continued rise in public debt and war-related financial risks. This signals to international markets that Israel’s fiscal path remains uncertain and risky. Outlooks like these make investing in Israel more expensive: when lenders view a borrower as riskier, they charge higher interest rates. And higher borrowing costs can become self-reinforcing: more expensive loans require more government spending on interest alongside regular spending, which in turn requires more loans, and so on, in an escalating spiral.

To get out of such a spiral, governments have to cut spending heavily. International credit agencies and the Bank of Israel warned the government, ahead of the approval of this year’s budget, that it would need to cut spending now to prevent such a spiral, but those warnings went unheeded.

The consequences of those choices will not fall evenly. Israel is currently in an election year with a budget that its own central bank considers fiscally reckless, a deficit ceiling that experts expect to be breached before the year is out, and a society still deeply divided over who bears the burdens of national service. Whatever government emerges from the autumn elections will inherit all of this, the debt, the manpower crisis, and the unresolved argument over fairness and equality that has underpinned Israeli public life for decades.