Israel's fiscal deficit for the twelve months ending December 2025 reached 4.7% of gross domestic product, slightly higher than the previous month but notably lower than the Ministry of Finance's forecast of 5.2%. This marks a significant improvement from the 6.8% deficit recorded at the end of 2024. State revenues rose to NIS 520 billion in 2025, boosted by tax increases and legislative changes, including a surtax on capital income and a higher value-added tax rate. War-related expenses for 2025 were estimated at NIS 78 billion, contributing to a cumulative direct cost of NIS 199 billion since the conflict began. Despite the better-than-expected deficit, officials caution that the figure remains high and will not reduce the debt-to-GDP ratio, with the 2026 budget proposal setting the deficit at 3.9%.