Gaza war will double Israel’s debt in 2023

Israeli Ministry of Finance said on Monday that the war with the Palestinian Islamic Resistance Movement (Hamas) in Gaza led to a doubling of Israel’s debt last year.

According to Reuters, the ministry said in a report that Israel recorded debts amounting to 160 billion shekels ($43 billion) in 2023, including 81 billion shekels since the outbreak of the war in October.

Israel borrowed 63 billion shekels in all of 2022.

Accountant General Yali Rotenberg said that 2023 was full of challenges and entailed a sharp increase in financing needs and “required tactical and strategic adjustments” in the borrowing plan.

He added, “Despite the many ambiguities and challenges, the ability to borrow in local and global markets, even in times of war, in large amounts and with very high coverage ratios shows the great potential of Israel’s access to markets and indicates the strength of the Israeli economy.”

Total debt reached 62.1% of GDP in 2023, up from 60.5% in 2022 due to high war spending, and is expected to reach 67% in 2024.

Last month, Israel raised a record $8 billion in its first Eurobond sale since the October 7 Hamas attack, with extremely high demand recorded even after Moody’s downgraded Israel’s credit rating for the first time ever in February.

In 2023, the government borrowed about 116 billion shekels, or 72% of the total debt, locally, 25% from abroad, and the rest in the form of non-tradable local debt.

The ministry said that Israel’s public debt increased 8.7% last year to 1.13 trillion shekels, supported in part by higher inflation and interest rates.

The debt service to GDP ratio was unchanged last year at 2.4%.

When lowering Israel’s credit rating to A2, Moody’s pointed to the material political and financial risks due to the war with Hamas.

A month ago, representatives of the Israeli Parliament gave their final approval to the amended budget for the year 2024, which added tens of billions of shekels to finance the war that has been ongoing for more than 6 months with Hamas, with additional spending on defense and compensation for families and companies affected by the conflict.