$8.3 Billion Surge In Israel's Defense Budget Highlights Strain Of Ongoing War

To strengthen its military prowess amidst ongoing strife with Hamas, Israel is poised to augment its defense budget by a substantial 30 billion shekels ($8.3 billion) in 2024.

What Happened: Bloomberg reported on Monday that the Israeli Finance Ministry disclosed that the total 2024 budget is anticipated to reach 562 billion shekels ($155 billion), a considerable jump from the initially approved 513 billion shekels($141 billion) in May. The increased military expenditure and an additional 10 billion shekels ($2.75 billion) for the evacuation of residents from border areas, heightened security services, and reconstruction of settlements damaged during Hamas’s October attack were cited as reasons by the Ministry.

The Ministry’s estimates underscore the severe financial impact of the war on Israel, which has mobilized hundreds of thousands of reservists in the Gaza Strip and along its northern border to counter threats from Hezbollah militants in Lebanon. The budget assumes high-intensity fighting will cease in Q1 2024, allowing Israel to demobilize some reservists.

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Despite mounting international pressure for Israel to transition from large-scale attacks to more targeted operations, Israeli Prime Minister Benjamin Netanyahu insists that the war will persist until Hamas is eradicated, without a defined timeline for de-escalation.

The Ministry noted that additional funding would be necessary regardless of further U.S. aid, with 4 billion shekels ($1.11 billion) required for higher debt costs. Government revenues are expected to decline by 35 billion shekels ($9.66 billion) amid the conflict due to dropping corporate and real estate taxes and decreased private consumption. If the current taxation plan remains unchanged, the fiscal deficit could skyrocket to nearly 6% of GDP, exceeding the 2.25% legal limit.

Why It Matters: This significant increase in Israel’s defense budget can be seen as a response to Prime Minister Netanyahu’s unyielding stance on the Gaza conflict. Despite international calls for a ceasefire, Netanyahu has been adamant that the conflict will continue until Hamas is destroyed. The war’s financial toll on Israel underscores the gravity of the situation and the country’s commitment to defending its borders and ensuring the safety of its residents. This budget surge thus serves as a testament to Israel’s resolve in the face of ongoing conflict.

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