Since the start of the conflict with Palestinian militant group Hamas, Israel has raised nearly $8 billion in debt, according to the Finance Ministry. The country has raised about 30 billion shekels ($7.8 billion) in liabilities, with $4.1 billion of that amount in dollar-denominated debt raised in international markets.
The government has increased its borrowing significantly in order to fund military and humanitarian expenses arising from the conflict, including compensation for businesses near the border with Gaza, as well as the families of victims and hostages taken by Hamas. This has led to a record budget deficit that ballooned to $6 billion last month, a more than sevenfold increase compared to one year ago.
The Finance Ministry has announced plans to borrow 75% more in November than last month, and Bank of Israel Governor Amir Yaron has called on the government to balance “supporting the economy and maintaining a sound fiscal position.”
Prime Minister Benjamin Netanyahu’s vow to “open the taps” to help those impacted by the conflict with Hamas is expected to drive up the deficit and debt-to-GDP ratio through 2024, according to economists. This has also led to international credit rating agencies such as S&P, Fitch, and Moody’s to express concerns about Israel’s credit rating.
S&P recently cut Israel’s rating from ‘stable’ to ‘negative’, and Fitch has placed the country on negative ratings watch, warning that a prolonged conflict could result in a significant deterioration of Israel’s credit score. Moody’s has also said it is mulling a possible downgrade for the country.
The government’s ability to continue financing its needs has also been highlighted, with officials claiming that the government can now “fully and optimally finance all its needs.” The increase in borrowing, however, has raised concerns about Israel’s fiscal position and its economic stability.
With concerns about increased liabilities and a growing budget deficit, the economic outlook for Israel amidst the conflict with Hamas remains uncertain. The government’s commitment to addressing humanitarian and military needs has put pressure on the country’s financial resources, leading to concerns from both domestic and international observers about the long-term impact on Israel’s economy.
The current borrowing figures and the government’s plan to significantly increase its liabilities in the upcoming weeks, combined with the concerns from credit rating agencies, have raised questions about the long-term economic stability of Israel in the midst of the ongoing conflict with Hamas. As the financial costs from the conflict continue to mount, the ability of the Israeli government to address these challenges and maintain its fiscal position remains a topic of ongoing concern among both policymakers and economic analysts.