Budgets cut to pay for war

By Anshel Pfeffer, September 4, 2014

The overall damage to Israel's economy from 50 days of fighting is still being assessed. So far, the cost is estimated to be between NIS 15 and 20bn (£2.5bn-£3.4bn).

The cost to Israeli industry, particularly factories in the south hit by rockets or forced to close down, is estimated at around NIS 1.3bn (£230m).

The tourism sector meanwhile, which was particularly affected because the fighting took place during the summer holidays, lost around NIS 2bn (£340m) in revenue.

Aside from the damage to the civilian sectors, the IDF is demanding NIS 9bn (£1.5bn) to cover costs incurred by Operation Protective Edge; to enlarge the annual defence budget to counter new threats from Gaza and on Israel's northern border with the rise of Isis.

The first financial decision of the government following the ceasefire was to slash the budgets of all departments - except for the defence ministry - by NIS 2bn (£340m). The brunt of the cuts hit the education budget, which was slashed by NIS 517 million (£87m); social services were cut by NIS 63m (£10m); and the implementation of a government programme to fight poverty will have to be postponed by a year.

Of the reallocated money, NIS 1.5bn (£254m) will go to the IDF to cover the immediate costs of the operation, while another NIS 500m (£85m) is for urgent rebuilding in areas near the Gaza border, which were most affected by rocket and mortar fire.

The damage to Israel's economy is coming at an awkward time. Growth reached a high of 5 per cent in 2010 but is predicted to fall to an average of 2.8 per cent over the next five years.

Estimated total cost of war to Israel

Amount demanded by the IDF to cover costs incurred during Operation Protective Edge

Amount cut from education budget to pay war expenses

Cash allocated for compensation and rebuilding in south

Last updated: 3:45pm, September 4 2014