'Israel's' $16bln bill of war cost warns of budget deficit freefall

By Al Mayadeen English
Source: Bloomberg
10 May 2024 14:28
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The rising costs of war and a growing budget deficit worsen an already deteriorating Israeli economy.

A man walks below flags flyng at a Pro-Palestinian encampment at MIT, Thursday, May 9, 2024, in Cambridge, Mass (AP)

After seven months of war on Gaza, "Israel" racked up a bill of 60 billion shekels ($16 billion), leaving in its trace a deficit way past this year’s target and a deteriorating economy, Bloomberg reported.

Data by the Finance Ministry on Thursday revealed that the 12-month trailing fiscal shortfall increased to 7% of GDP as of April, higher than the occupation's estimate of 6.6% for the full calendar year of 2024.

Expenditure skyrocketed around 36% in just the first four months of 2024 from the same timeframe a year prior, and around two-thirds went toward defense, while revenues plunged 2.2%, due to a drop in tax payments.

Fiscal adjustments amounting to 1.1% of GDP on both the revenue and spending have been prepared to relieve the soaring costs but haven't been approved yet.

Next year is also due to witness a percentage point increase in value-added tax, which will generate annual revenues estimated at 0.35% of GDP.

Back in February, the occupation received its first-ever downgrade from Moody’s Investors Service.

Moody’s is due to review "Israel’s" debt score this week, but a negative outlook will probably still linger around.

Last week, the Israeli shekel was showing signs of weakness, according to Israeli analysts, with the shekel-dollar exchange rate currently at NIS 3.7444, compared to NIS 3.723 a day prior. The shekel fell more sharply against the euro from a day prior's representative rate of NIS 3.9941/€ to today's rate of NIS 4.0315/€.

The deteriorating situation comes amid a deadlock in the negotiations between "Israel" and Hamas regarding a ceasefire deal and the release of captives and amid "Israel's" plans to invade Rafah.

Since the commencement of the war, "Israel" has already issued several privately placed bonds in various currencies, including the dollar, the euro, and the yen. But the regime had refrained from entering the public market until now.

The genocide in Gaza has had a significant toll on the Israeli economy. The drafting of 300,000 reservists impacted several economic sectors, including the tech industry, commerce, and tourism, among others.

Just five days ago, the Israeli Security Ministry accelerated the procurement of Israeli-made arms-related purchases, as a result of the ongoing war on Gaza.

According to the Israeli 0404 news website, the ministry has signed a 376 million Shekel deal ($101.16 million) with Tel Aviv-based IMCO, an electromechanical and electrical solutions company concerned with producing and developing military-related systems.

The deal signed with IMCO will extend for four years, in which the company will be responsible for delivering approximately $100 million worth of equipment. IMCO will work with several of its US-based subsidiaries to provide the agreed-upon equipment.

Moreover, this is the largest deal signed by the Israeli ministry with IMCO, highlighting the growing need to refurbish and improve Israeli military vehicles, which have been a constant target for Palestinian Resistance fighters since October 7, 2023.