Official figures from Israel’s Finance Ministry suggest that state’s debt in Israel has almost doubled since the war in Gaza started on October 7.
This Tuesday, Israel’s Finance Ministry announced in a statement that due to the war in Gaza that Israel started on October 7, “the country’s borrowing has almost doubled.”
Speaking to Reuters, accountant general Yali Rotenberg from the Finance Ministry said that Israel raised 160 billion shekels ($43bn) in debt in 2023, half of it, which accounts for 81bn shekels, belong to the time period when Israel started an offensive in Gaza in early October. To show how big this number of national debts is for such a short period of time, it is good to mention that Israel raised nearly 63bn shekels in all of 2022.
The year 2023 was a challenging year that required a sharp increase in financing needs and required tactical and strategic adjustments in the government’s debt raising plan. But when the war started, everything changed and financial planning to curb increasing national debt was almost forgotten,” Rotenberg said.
Also due to the spike in war spending, Israel’s total debt amounted to 62.1 per cent of its gross domestic product (GDP) in 2023, up from 60.5 per cent in 2022. But the worse news for Israel is that this trend is not going to stop and as Rotenberg said, is expected to reach 67 per cent in 2024.
One of the main reasons for this growing debt is that last month, lawmakers in the Knesset gave their final approval to an amended 2024 state budget that added tens of billions of shekels to fund the still ongoing war in Gaza, with extra spending on defense and compensation to households and businesses hurt by the war, a huge sum of money that can be supplied only through foreign borrowing. The unprecedented economic blow also comes as a result of Israel’s mobilizing its 300,000 reservist forces, over 100,000 settlers displaced in the north and south, a decrease in consumer spending, and the 150,000 Palestinian cheap laborers who have been barred from entering Israel from the Occupied West Bank due to the war.
In a similar report, BBC also explained the dire economic situation in Israel due to the war in Gaza and noted that because of the war, “private spending dropped by 26.3%, exports fell by 18.3% and there had been a 67.8% slide in investment in fixed assets, especially in residential buildings, all from October 7 to mid-April. Meanwhile, government spending, mainly on war expenses and compensating businesses and households, jumped by 88.1 per cent during the same time period.”
Israeli government is only making things worse!
While Israel’s economy is shrinking day by day, the initiatives that the Netanyahu government plans to implement will only make things worse. Israel, for example, plans to raise $60 billion in debt this year, as well as freezing government hiring and raising taxes because it has nearly doubled its war spending.
On the political arena, Israel still insists to expand its invasion into Rafah, in southern Gaza, despite the economic need to de-escalate. Rafah is where over a million Palestinians currently seek shelter.
But expanding and continuing the war for Israel will increase fears regarding Hezbollah and Hamas retaliations, which will inevitably increase defense spending, a move that will surely deepens economic hardship for Israel.
The Israeli government already plans to increase defense spending this year by 55 billion shekels – around $15 billion. This marks an 85 percent increase in defense spending, from 13.5 percent of the national budget before the war to 20 percent in 2024.
