The Israeli Ministry of Finance suggested on Monday that the war the country is waging in the Gaza Strip will likely cost it at least 50 billion shekels ($14 billion) in 2024, and will cause the budget deficit to increase nearly three times, anticipating that the fighting will continue until February. Next February.
The ministry’s deputy budget official, Eti Temkin, said that the war is expected to continue for at least another two months, explaining in his speech before the Knesset Finance Committee (Parliament) that the budget will allocate 30 billion shekels for security and another 20 billion for civilian and other expenses.
He added that this would raise total defense spending by more than NIS 50 billion, exceeding the amount initially allocated.
Total budget spending in 2024 will rise to NIS 562.1 billion from the previously planned NIS 513.7 billion, leading to a budget deficit of 5.9% of GDP, up from an expected pre-war deficit of 2.25%.
With the deficit expected to rise by NIS 75 billion to NIS 114 billion next year, Temkin said the gap would require cutting other expenses or increasing revenues.
He pointed out that the new budget plan did not include the possibility that the war in Gaza would extend until March or later.
2023 budget
Earlier this month, the Knesset approved a special war budget for the year 2023 amounting to about 30 billion shekels to help finance the war and compensate those affected by the “Al-Aqsa Flood” operation launched by the Palestinian resistance on the 7th of last October, which led to the war and the missiles that… Launched from Gaza and Lebanon.
Knesset Finance Committee Chairman Moshe Gaffni said that he opposes increasing income taxes, but supports imposing taxes on bank profits and measures to promote economic growth.
For his part, Finance Minister Bezalel Smotrich later told reporters that he would work to avoid increasing the financial burden on citizens during the war, and that his priority for 2024 was to help reservists and their families.
Speaking about the army forces, he added, “They left everything and risked their lives for all of us, and we must do everything to reward them in the best way possible,” adding that the Ministries of Finance and Defense are working on “a very big plan for the benefit of reserve soldiers and their families.”
It is noteworthy that Israel has summoned about 350,000 people to its reserves since the beginning of the war.
The Ministry estimated an economic contraction in the last quarter of this year of 19% on an annual basis compared to the third quarter, which witnessed growth of 2.5%. For the whole of 2023, it expects growth of only 2%, and growth of 1.6% in 2024.
It also expects the annual inflation rate to end the year at 3.1%, then decline to 2.6% next year.
Past costs
The Israeli Ministry of Finance had stated that the cost of the war on the Gaza Strip in the first three weeks had cost the general budget 30 billion shekels ($8.3 billion), which does not include the losses of small and medium-sized commercial interests, and the direct and indirect damages incurred by Israeli economic activity after the “Al-Aqsa Flood” operation. launched by the Palestinian resistance led by the Izz al-Din al-Qassam Brigades, the military wing of the Islamic Resistance Movement (Hamas).
The head of the Finance Budget Division, Yogev Gerdos, revealed at the time that the fighting expenses per day cost about one billion shekels, and the total spending will increase as the fighting continues.
The Finance Ministry estimated at the time that the damage to the economy’s GDP amounted to about 10 billion shekels per month from the fighting, meaning that growth in Israel would slow significantly for the remainder of the year.
Gerdos said that the costs of the current war on Gaza are enormous compared to previous rounds of combat, and “we need to act responsibly. It seems that the war will continue for a long time, and we do not want to receive a financial and economic blow as well.”
