27/2/2025–|Last update: 27/2/202511:30 AM (Mecca time)
The Israeli Central Bank has recommended local banks to allocate 3 billion shekels (841 million dollars) over the next two years to finance a package of aid to citizens with economic repercussions caused by the war, according to Bloomberg.
According to the Central Bank statement issued yesterday, Wednesday, these recommendations, which are often mandatory by lenders in Israel, are an extension of previous banking procedures. The beneficiaries of this aid include reserve soldiers, residents who have been evacuated from danger areas, and families of the injured as a result of the war.
The central bank pointed out that the “high profitability of Israeli banks” must enable it to bear the financial burdens of this package, which amounts to 1.5 billion shekels (420 million dollars) annually over a period of two years if necessary. Aid will be distributed according to the share of each bank in the market.
The impact of the war on the Israeli economy
Since October 2023, Israel has been fighting a war on the Gaza Strip, in parallel with a military escalation with Hezbollah in southern Lebanon. These tensions constituted a huge burden on the Israeli economy, which led to the slower economic growth in the country for more than two decades, with the exception of the Corona pandemic period.
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According to the report, these wars did not only affect public finance and increase deficit, but also caused a sharp slowdown in economic activity, with decreased investments, capital escaping, and high security and defense costs to unprecedented levels.
The Central Bank’s announcement comes in light of the continued ambiguity of the future of the war, as the six -week temporary truce ends next Sunday, amid doubts about the possibility of its extension. Bloomberg believes that the continuation of the fighting or the collapse of the ceasefire may increase the complexity of the economic crisis, which puts the Israeli government in front of unprecedented financial challenges.
In light of these conditions, Israel is facing increasing pressure to find solutions to alleviate the economic burdens on citizens, at a time when the public budget suffers from a major impotence due to the huge military costs and the aid required for the groups affected by the war.
