Weekly Commentary: Earmark IAI & Rafael Sales Proceeds To Expansion of
Domestic Defense Manufacturing

Dr. Aaron Lerner 30 April 2026

Israel has a unique opportunity to convert a one-time privatization windfall
into lasting strategic strength.

The planned sale of 25 to 30 percent stakes in Israel Aerospace Industries
and Rafael is expected to raise between 40 and 50 billion shekels - roughly
$12 to $15 billion - equivalent to three to four years of regular U.S.
military aid in a single transaction.

Prime Minister Benjamin Netanyahu has publicly committed to a $110 billion,
ten-year program to expand domestic defense manufacturing.

Yet without a legal mechanism to ring-fence the proceeds of these sales, the
funds risk being absorbed into the general budget and diverted to short-term
political priorities instead of long-term military industrial capacity.

The solution is straightforward.

Israel already has the Citizens of Israel Fund (also known as the Israel
Citizens' Fund) as a working model for ring-fencing windfall revenues, along
with precedents - such as the Google-Wiz deal - for large transactions
settled in dollars. The Tel Aviv Stock Exchange has supported dollar
settlement since 2024.

Targeted legislation can establish a dedicated Defense Industrial Investment
Fund, allow the proceeds to be received in dollars and held offshore, and
legally restricted to capital investment in Israel's defense production
base.

This structure would enable Israel to execute the full sale in one or two
large blocks while global demand for defense assets remains elevated, rather
than spreading smaller tranches through 2027.

This arrangement would transform a fiscal windfall into a genuine strategic
industrial upgrade by ensuring that the funds are used as intended while
effectively neutralizing the impact on the shekel exchange rate of what
would otherwise be huge shekel transactions.

The window is open.

The mechanism is proven.

The only question is whether Jerusalem will seize the moment - or let
another privatization windfall dissolve into ordinary government spending.
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