Israel’s fiscal deficit narrowed to 4.7% of GDP in the 12 months to the end of February 2026 or NIS 101 billion, down from 4.9% at the end of January 2026, the Ministry of Finance Accountant General reports.
These fiscal deficit figures do not yet reflect the war in Iran, which began on the last day of February. War spending and lower economic activity will push the deficit upward in the next update to be published by the Ministry of Finance in April.
Just before the renewed war with Iran, February ended in Israel with a very low monthly deficit in historical terms - amounting to NIS 2.2 billion. Excluding January, which is traditionally a month of budget surpluses in the Ministry of Finance, February was the month with the best deficit figure in Israel since the outbreak of the war on October 7, 2023. March, will probably be one of the months with the highest deficit.
21% jump in tax revenues
State revenues in February exceeded Ministry of Finance forecasts and amounted to NIS 47.8 billion - a jump of NIS 8.3 billion compared with February 2025. On the other hand, government spending last month was NIS 50 billion, up NIS 4.5 billion from February 2025. Thus, the cumulative deficit in the last 12 months decreased, even though there was a deficit of NIS 2.2 billion last month.
The Israel Tax Authority noted that the state's tax revenues last month jumped by 21% compared to February 2025. "The increase in direct tax revenues was due to an increase in all deductions and a sharp increase in income tax revenues for the self-employed," the Authority wrote. "A significant portion of the increase in indirect tax revenues is explained by an increase in net VAT revenues, apparently due to relatively moderate consumption in January 2025 after increased consumption at the end of 2024 on the eve of the increase in the VAT rate from 17% to 18%."
The Accountant General said in the report that "February is the second month without an approved budget, in which the annual spending framework is approximately NIS 605.8 billion, which is approximately NIS 54.1 billion lower than the budget proposal, and approximately NIS 45 billion lower than the actual implementation in 2025." As a result, government ministry spending is currently restrained, except for defense expenses during the war.
Published by Globes, Israel business news - en.globes.co.il - on March 9, 2026.
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