Prime Minister Ehud Olmert on Sunday instructed Finance Minister Abraham Hirchson to raise the defense budget by NIS 1.9 billion, bringing the military budget to a record NIS 52.4 billion.

As a result of the increases, Hirchson is expected to reject coalition members' demands for increased social spending, chief among them the Labor Party's request for an additional NIS 2 billion.

The additional defense funding would be transferred as an advance payment on the 2007 defense budget, even before the budget is passed in the Knesset.

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Hirchson told Haaretz that in the current situation, the calls coming from coalition and opposition factions for funding on issues important to them are "illegitimate demands, and can therefore not be met. There will not be any deviation from the budgetary framework, the deficit will not grow, and as such there is no basis for these demands."

Hirchson added that he would present Olmert by Tuesday with a detailed outline of the potential sources for the additional funding.

"There are no sacred cows," Hirchson said, referring to the possible sources of funding. He maintained, however, that the 2007 budget would not grow.

In the first stage of the budget reconfiguration, Hirchson said, the Finance Ministry will attempt to fund the increased defense spending from sources within the defense establishment - for example, slowing the pace of construction of the West Bank separation fence or reforming regulations for regular military service.

In the next stage, the ministry will seek funds from the budgets of other government offices.

Hirchson said the budget would be approved this year, by November 2 at the latest.

The decision for an expanded defense budget was made at the end of a meeting between Olmert, Hirchson, Defense Minister Amir Peretz and Israel Defense Forces Chief of Staff Dan Halutz.

Following the meeting, senior defense officials said the budget allotted to the IDF for 2007 will not allow it to provide necessary security to the state, and requested an additional NIS 3.5 billion.

The officials also requested funds for special research and development projects.

Finance Ministry officials opposed any increase in the budget. Hirchson said any enlargement of the defense budget would come at the expense of social funding, contrary to what he called the government's commitment to raise social spending.

If Labor members of the Knesset Finance Committee do not support the budget, the Finance Ministry will have to obtain the support of the National Religious Party or another opposition party.

Olmert emphasized that the increased budget is not yet final, and that it is liable to be raised again following the recommendations of the Brodet Committee, which is reviewing the defense budget. The committee is expected to release its recommendations in April.

The IDF received an additional NIS 8.2 billion in the aftermath of the Lebanon war to replenish warehouses and ammunition stores.

The Brodet Committee is currently reviewing additional requests from the defense establishment, including widening the military's annual budgetary base by NIS 3 billion, and a one-time payment of NIS 9.6 billion to raise the army's level of preparedness.