Israel's war cost likely to exceed estimates: Finance Ministry

Israel might have to shell out more money to finance its war against Hamas than the country’s central bank had initially estimated. However, the country’s finance ministry believes that costs won’t exceed those incurred by Israel during the COVID pandemic. “I don’t think it will top what we spent on Covid, and I think they [the central bank] are too optimistic” about war costs, the unnamed official in the accountant general’s department, which manages government funds and debt, told reporters at a briefing today. Earlier this week, the Bank of Israel estimated that the budget deficit would be 2.3 per cent of gross domestic product in 2023 and 3.5 per cent in 2024. Meanwhile, Israel spent around 200 billion shekels ($49 billion) during the COVID pandemic. While Finance Minister Bezalel Smotrich has assured that the government will spend whatever is required on the war and compensation, the costs of financing military needs and compensating Israeli citizens affected by the war remain unclear.

Bank of Israel Governor Amir Yaron cautioned Monday that it was “important to continue conducting responsible fiscal policy.”

The central bank projects the debt-to-GDP ratio growing to 62 per cent this year and to 65 per cent in 2024 from 60.5 per cent in 2022.

Israel will have to raise more debt, but the government still has some maneuvering room, given the relatively low budget deficit and debt-to-GDP ratio before the war, as well as its long-term debt portfolio, the ministry official said. With inputs from Reuters