Israel is facing financial challenges as a result of its war on the Gaza Strip. The country plans to borrow $60 billion this year, freeze government employment, and increase taxes to cover the costs of the conflict. The Accountant General in the Israeli Ministry of Finance, Eli Rotenberg, shared this information with the British Financial Times.

Budget scenario

The war on the Gaza Strip has taken a toll on Israel's economy, causing a 20% shrinkage in the last quarter of 2023. The mobilization of a large number of troops and the displacement of settlers have contributed to this economic impact. Consumer spending has declined, and Palestinian workers from the West Bank have been prevented from entering Israel.

 Rotenberg mentioned that the demobilization of reserve soldiers is crucial for the economy's recovery. The government's budget is based on the expectation that the number of soldiers will decrease by the end of March.

Security presence

Despite the demobilization of soldiers, Israel plans to maintain a security presence in the Gaza Strip. There are concerns about potential conflicts with Lebanese Hezbollah forces across the border. The government intends to increase defense spending by 85% this year.

Proactive steps

To address the financial impact of the war, Israel plans to increase taxes and freeze government appointments. The Ministry of Finance is taking steps to ensure financial stability in the coming years.

For balance

To manage the increased spending, Israel will raise the value-added tax and impose taxes on smoking and banking services. Moody's has lowered Israel's sovereign rating due to concerns about the war's impact on the economy.

The government expects a budget deficit this year and a decline in economic growth. Israel has borrowed a significant amount to finance the war, and the debt-to-GDP ratio has increased. The ministry plans to raise more funds locally and internationally to manage the debt.

Rotenberg has met with investors to discuss borrowing options, emphasizing the importance of financial stability during this challenging time.

Source: British press

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