Israel posted a budget deficit of 4.7% of gross domestic product in ‍2025, down ‍from 6.8% in 2024, as stronger revenue offset defence ​spending as a result of the war in Gaza, the Finance Ministry said ⁠on Tuesday.

The deficit was below a target of 4.9% of GDP ⁠but was ‌above a November level of 4.5%. The deficit typically rises in December due to year-end adjustments by government ministries and hit ⁠23.7 billion shekels ($7.53 billion) in the month.

For all of 2025, the deficit reached 98.6 billion shekels, down from 135.6 billion in 2024 when there was a full year of war. ⁠Israel and Palestinian militant group ​Hamas reached a ceasefire accord in October 2025.

Revenue grew some 14% to 552 billion shekels last ‍year and was 35 billion shekels above ministry expectations and 67 billion over 2024, while ​expenses grew nearly 5%. Tax income alone rose 11% in 2025.

Excluding compensation, expenses for the Gaza war were 91 billion shekels in 2025. Since the war broke out on October 7, 2023 Israel's war expenses have been 232.4 billion shekels, plus 33 billion shekels in compensation to victims of the Hamas attack that triggered the conflict.

While the ceasefire has halted most fighting, it has not stopped entirely and both ⁠sides have accused one another of violating the ‌deal's provisions.

The deficit target for 2026 has been set at 3.9% of GDP, a level the Bank of Israel deems too ‌high since ⁠it doesn't allow for a reduction in the state's debt burden.

(Reporting by ⁠Steven Scheer; Editing by Andrew Cawthorne and Sharon Singleton)