Speaking at a Calcalist newspaper conference, Yaron said fiscal policy was the main challenge, especially since the defense budget has swelled to as much as 8% of gross domestic product \u2014 double that of before the Hamas attacks on Israel on October 7, 2023<\/a>, that triggered the Gaza war.<\/p>\n “We face a clear challenge for any government that enters office. First of all our debt must not continue to increase. Currently, we are on a path of rising debt,” he said, noting the debt-to-GDP ratio had risen to 70% from around 60% in 2023.<\/p>\n “The second is the defense budget … and third is investing in growth engines like education and infrastructure.”<\/p>\n Yaron also said Israel needs to better integrate population groups like ultra-Orthodox Jews into the labor market.<\/p>\n Budget director Maharan Frozenfar said the Finance Ministry was in the process of building a multi-year plan to boost growth that he hoped the next government would adopt.<\/p>\n “We need to take difficult actions to keep the momentum going and achieve even greater growth,” he said.<\/p>\n He added that the economy at large must adapt to the prospect of a strong shekel against the dollar.<\/p>\n With defense spending expected to stay high given Israel’s many regional threats, Yaron advocated raising taxes in 2027 to help keep debt under control. “Realistically, we will likely have a higher budget than before October 7,” he said.<\/p>\n Frozenfar, however, said he was “strongly opposed” to raising taxes and that stronger economic growth could help lower the debt burden.<\/p>\n![\"An](\"https:\/\/www.europesays.com\/iran\/wp-content\/uploads\/2026\/07\/454177.jpeg\"\/)
An Israeli flag flutters outside the Bank of Israel building in Jerusalem (credit: REUTERS)’Difficult decisions’ are needed to achieve growth as a country<\/p>\n