Israel sees defence spending climb by $8 billion next year as war rages

The projections underscore the high financial cost of the war for Israel, which has mobilized hundreds of thousands of reservists for its ground operation against Hamas in the Gaza Strip in the south, and deployed more troops in the north to counter threats from Hezbollah militants based in Lebanon. It’s using huge numbers of costly missiles for its airstrikes in Gaza and to intercept rockets and drones fired into Israeli territory.

The Finance Ministry’s document assumes high-intensity fighting in Gaza will end in the first quarter of 2024, presumably allowing Israel to de-mobilize some reservists. While the US has put pressure on Israel to shift from a large-scale military attack to more targeted operations to reduce the toll on Palestinian civilians, Israeli Prime Minister Benjamin Netanyahu has repeatedly said the war will last for as long as it takes to destroy Hamas. He and his cabinet have put no timeline on the intense period of fighting, or the wider war itself.

The ministry said the extra funding will be needed regardless of additional aid from the US. It added that 4 billion shekels more are needed for larger debt costs.

Government revenues are expected to drop by 35 billion shekels due to lower corporate and real estate taxes, as well as a slowdown in private consumption.

If no changes are made to planned taxation, the fiscal deficit would balloon to close to 6% of gross domestic product, well beyond the 2.25% ceiling set by law, the document said.

The government is set to discuss possible fiscal changes and an increase in the deficit ceiling, which the Finance Ministry recommends should not exceed 4.5%-5% of GDP in 2024.

Hamas, designated a terrorist organization by the US and European Union, killed around 1,200 people and abducted 240 with its attack. More than 20,000 people have since died in Gaza, according to the health ministry in the Hamas-run Palestinian enclave.