Smotrich says strong shekel will be 'the new normal'

Israel rolls out NIS 1.6 billion aid plan for tech sector hit by rapid shekel surge

Government vows program will help extend eroded financial runway of startups and export companies and enable them to maintain and expand their R&D centers and operations in Israel

Finance Minister Bezalel Smotrich on Tuesday presented a NIS 1.6 billion ($537 million) assistance package intended to help Israeli startups and tech firms cope with the steep appreciation in the shekel, which harms their competitiveness and makes operations in Israel costlier and less viable.

“We now understand the great challenge facing Israeli high-tech, which is a combination of the AI revolution, coupled with the vast appreciation of the shekel,” said Smotrich.

“The problem is not the strong shekel rate as it is probably going to be the new normal, which in itself is an expression of the strength of the Israeli economy,” Smotrich added. “The problem is the rapid pace at which the shekel has strengthened and the difficulty and challenge of export-oriented industries in adapting to changes at such a pace.”

Smotrich reiterated his plea to the Bank of Israel to do its part as the body
entrusted with fiscal policy.

“For some time, I have expressed that a significant reduction in interest rates, which will affect the exchange rate, is the policy response that can best support and accelerate economic growth,” said Smotrich.

For weeks, local tech exporters and manufacturers have been warning that the strength of the shekel, which last month reached a 33-year peak against the dollar trading at around 2.80, poses a serious risk to major growth engines of the economy. Year-over-year the local currency has been strengthening by more than 20 percent against the dollar.

In response, the government established at the beginning of June an inter-ministerial task force to help the tech sector cope with the effects of the shekel’s fast rise in value, which has already led to mass layoffs and fears that startups and tech companies will increasingly depart for cheaper markets.

The lion’s share of the new assistance program, budgeted at NIS 1 billion, is being allocated to a fast-track funding support program operated by the Israel Innovation Authority. The support program is geared to help young and cash-strapped, as well as more mature, growth-stage technology companies navigate the financial impasse created by the strong shekel.

“We are facing a challenge, which is not based on technology or on the global demand for innovation but that was caused by the steep change in the dollar-shekel exchange rate,” said outgoing Israel Innovation Authority CEO Dror Bin.

“Startups are raising money in dollars, they are selling their products to global markets in dollars while they pay costs in shekels in Israel, and this means that they have less money to spend on the development of their products and on breaking into new global market,” he said.

“If they run out of funds faster, it means they will be less competitive than their global counterparts, and if they slow down, the Israeli economy might slow down, and this is why we understood that we needed to intervene to make sure local startups have enough funds to continue and grow.”

Tech contributed to about half of the economy’s growth in 2025, and its share of GDP reached a record high of 18.3%, cementing the sector as a major pillar of the economy.

“Our responsibility is to ensure that, even as the global landscape evolves, Israel remains the destination where companies choose to invest, develop breakthrough technologies, and scale their businesses,” said Bin.

As part of the assistance package, another NIS 175 million will be made available for advanced manufacturing equipment for the industry via grant programs within the framework of the Law for the Encouragement of Capital Investments and the Advanced Manufacturing Productivity Program.

Another NIS 25 million will be allocated to expand the programs of the Israel Export Institute and will go toward grants to help exporters reach global markets. A budget of NIS 10 million will be funneled to employer-led vocational training programs designed to equip workers with the skills required for high-productivity jobs.

In addition, the government will expand tax incentives under the Law for the Encouragement of Capital Investments, at an estimated fiscal cost of about NIS 360 million.

Karin Mayer Rubinstein, CEO of the Israel Advanced Technology Industries (IATI), criticized the government’s program for focusing “primarily on creating future growth engines, while the companies’ most pressing need today is an immediate response to the economic and operational challenges created by the strengthening of the shekel.”

“Many companies are not currently looking for growth incentives, but rather for tools that will help them preserve their existing operations in Israel, retain their employees, and maintain their R&D centers,” said Mayer Rubinstein.

“Among other things, adjustments to tax payments and employer-related expenses should be considered, including temporary mechanisms that would ease companies’ cash flow, as has been implemented in other countries during periods of economic challenges.

“We believe that the Law for the Encouragement and Promotion of Research and Development should be expanded to include strategic multinational companies that do not hold their intellectual property (IP) in Israel, but operate significant R&D centers here, employ thousands of people, and serve as a key pillar of both the Israeli economy and the country’s high-tech industry,” Mayer Rubinstein remarked.