Israel will need to raise defence spending by $18b as war rages in Gaza

JERUSALEM - Israel will need to increase defence spending by about 50 billion shekels (S$18.2 billion) in 2024, according to the Finance Ministry, as the war against Hamas rages on.

The ministry, in a document presented to Parliament on Dec 25, said the overall 2024 budget will probably have to total 562 billion shekels, compared with 513 billion shekels when the spending plan was first approved in May.

As well as the military spending, the ministry said an additional 10 billion shekels will be required to cover the evacuation of around 120,000 people from Israel’s northern and southern border areas, higher budgets for police and other security services, and the reconstruction of settlements destroyed during Hamas’ attack on Oct 7.

The projections underscore the high financial cost of the war for Israel, which has

mobilised 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 is using huge numbers of costly missiles for its

air strikes 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 demobilise some reservists.

While the United States 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.

Israel’s Minister of Strategic Affairs Ron Dermer, considered a confidant of Mr Netanyahu, was expected in Washington on Dec 26 for talks with White House and State Department officials about Israel’s plans for eventually scaling down the war, Axios reported, citing Israeli and US officials it did not name. 

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 per cent of gross domestic product (GDP), well beyond the 2.25 per cent 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 per cent to 5 per cent of GDP in 2024.

Hamas, designated a terrorist organisation by the US and European Union, killed around 1,200 people and abducted 240 in its attack.

Nearly 20,700 people have since died in Gaza, according to the Health Ministry in the Hamas-run Palestinian enclave. BLOOMBERG