Israel: war against Palestinians in Gaza doubles state’s borrowing in 2023

Israel’s war against the Palestinians in Gaza led to a doubling of the country’s borrowing last year, the Finance Ministry said on Monday. Reuters has reported that the occupation state raised 160 billion shekels ($43bn) in debt in 2023, half of it, 81bn shekels, since the start of its military offensive in October. Israel raised 63bn shekels in all of 2022.

Accountant General Yali Rotenberg said that 2023 was a challenging year that required a sharp increase in financing needs and “required tactical and strategic adjustments” in the government’s debt raising plan.

“Despite the many uncertainties and challenges, the ability to raise debt in local and global markets, even in times of war, in significant volumes and very high coverage ratios, shows the high accessibility of the State of Israel to the markets and is evidence of the strength of the Israeli economy,” said Rotenberg.

Total debt amounted to 62.1 per cent of the gross domestic product in 2023, up from 60.5 per cent in 2022 due to the spike in war spending. It is expected to reach 67 per cent in 2024.

Israel raised a record $8bn last month in its first international bond sale since 7 October. There was very high demand even after Moody’s gave Israel its first ever sovereign credit rating downgrade in February.

Israel’s public debt grew 8.7 per cent last year to 1.13 trillion shekels, boosted partly by higher inflation and interest rates, the ministry said. Interest expenses-to-GDP ratio was unchanged last year at 2.4 per cent.

In its credit ratings downgrade to “A2”, Moody’s cited material political and fiscal risks for the country from its offensive against the Palestinians.

Lawmakers in the Knesset gave their final approval a month ago to an amended 2024 state budget that added tens of billions of shekels to fund the more than six-month old offensive, with extra spending on defence and compensation to households and businesses hurt by the conflict.

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