Emergency Budget: Expenses Reduced by 1.21 Billion Shekels Due to "Austerity Measures and Cost Control"

Exclusive to SadaNews: The emergency budget announced by the government for the current year 2026, based on cash flow, indicates that the total expenditures (excluding net lending and public debt servicing) will reach 17.7 billion shekels, which is approximately 1.21 billion shekels less than the national reform program amounting to about 19.12 billion shekels, reflecting measures in cost control and the implementation of austerity steps.

The emergency budget assumes ensuring institutional continuity and securing the minimum essential services under severe financial constraints, as the allocations included in the draft budget law represent the minimum necessary allocations for the existence of international institutions, and the contracting of liabilities and spending from allocations is contingent upon the availability of financial liquidity, not necessarily a government commitment towards centers of financial responsibility.

The value of employee compensation in this budget is about 9.4 billion shekels, constituting 51% of total current expenditures, as proactive measures have been taken to contain the growth of the wage bill and the number of employees during the year 2026, while the wage bill and similar salaries represent 66% of current expenditures and 78% of net revenues, and 71% of the budget of centers of responsibility, reflecting the rigid structure of current spending.

According to the budget, the total government support allocated for fuel, electricity, and water support, whether for camps or tariff differentials, exceeds 1.3 billion shekels in the budget. The budget includes a 44% reduction in the travel expenses item compared to last year.

The actual revenue size reached about 14.57 billion shekels in 2024, while expenditures amounted to about 19.36 billion shekels, resulting in a deficit nearing 5 billion shekels, whereas revenues in 2025 reached about 15.28 billion shekels and total expenditures around 18.83 billion shekels, with a deficit of about 3.55 billion shekels.

However, these figures remained captive to retained clearance funds, which represent approximately 67% of total revenues, while local revenues constituted only 33% of the revenues.

Current expenditures accounted for 95% of total expenditures during 2025, compared to only 5% for developmental expenditures.

Budget data reveal that external support for the budget rose from 1.3 billion shekels in 2023 to 3 billion shekels in 2024, then to 3.2 billion shekels in 2025, reflecting an exceptional leap in 2024 followed by a more moderate growth pace. The increase was primarily focused on funding the current budget, while funding for the developmental budget remained nearly stable, indicating that the majority of support was directed toward covering operational expenses.

The 2026 budget anticipates that the deficit before grants will reach about 3.78 billion shekels, representing 6% of GDP, while the deficit after grants is expected to be around 1.30 billion shekels, or 2% of GDP. If the retained clearance funds are not released, the net cash deficit could reach 11.86 billion shekels, equivalent to 18.9% of GDP.

Public finance expert Moyad Afana told "SadaNews" that the context of preparing the 2026 budget as a realistic emergency budget based on available cash flows came in response to the emergency situation in Palestine, due to the Israeli economic strangulation, and the seizure of all clearance revenues since May 2025, which deprived the general budget of 68% of its estimated revenues, in addition to the overall decline of the Palestinian economy due to the Israeli genocide war on the Gaza Strip and the suffocating economic blockade in the West Bank, through several tools, including zeroing clearance revenues, preventing workers from returning to their jobs inside the Green Line, and cutting off the West Bank with hundreds of gates and checkpoints, among others.

Afana emphasizes that it would not have been possible to adopt a classical budget under these circumstances, so it was imperative to shift toward an emergency budget based on available cash flows, enhancing the resilience of the Palestinian citizen, and focusing on ensuring institutional continuity and securing the minimum essential services in light of sharp financial constraints.

Afana believes that the 2026 budget carries a number of positive and necessary issues, including a stringent reduction and rationalization of operational expenditures, including travel tasks, halting developmental expenditures from the public treasury, prioritizing the continuation of services in education, health, security, and social protection sectors, as well as raising the emergency budget to respond to emergency situations, especially in areas subjected to occupation measures and settler violence, in addition to continuing government support for marginalized groups and maintaining support for fuel, electricity, and water.

However, Afana points out that the general budget for 2026 faces fundamental challenges in revenue availability, especially regarding the continuity of salary payments and covering essential operational expenses, particularly for sectors such as health, as they rely primarily on local revenues and limited external support, thus a comprehensive national strategy must be devised that involves intense international pressure to release clearance revenues, secure urgent Arab and international support for the budget through the emergency fund announced by France and Saudi Arabia last September, in addition to enhancing national products to provide additional local revenues, rationalizing public spending, and improving tax collection without burdening citizens with additional costs.