In the past year, Israel has deployed thousands of troops to Gaza and southern Lebanon and has carried out thousands of airstrikes on its enemies there.

Additionally, Israel has spent millions of dollars using its air defense system to intercept and destroy incoming missiles and drones.

The Israeli government has estimated that the ongoing war against Hamas and Hezbollah could cost over $60 billion.

This war has already severely impacted Israel’s economy. In September 2024, Israeli Finance Minister Bezalel Smotrich told the Israeli parliament, the Knesset, “We are in the longest and most expensive war in Israel’s history.” He also mentioned that the cost of this military operation could range between 200 billion and 250 billion shekels ($54 billion to $60 billion).

Israel’s bombing of Lebanon, increasing its military presence in southern Lebanon, and conducting airstrikes there in response to Iranian attacks will continue to add to the cost of this war.

Dr. E. Algrhahi, an economist from Sheffield Hallam University in the UK, notes that if the war extends further and continues into 2025, the estimated cost could rise to approximately 350 billion shekels ($93 billion).

This amount represents one-sixth of Israel’s Gross Domestic Product (GDP), which stands at 1.99 trillion shekels ($530 billion). The Bank of Israel has increased the sale of government bonds to raise funds for the war.

In March 2024, the bank raised $8 billion from the sale of one bond issuance, a record amount.

Israel is selling its bonds to lenders within Israel and abroad, including “Diaspora Bonds” marketed to Jews outside Israel.

Bank of Israel data shows that foreign interest in buying Israeli government bonds has declined.

The bank reports that only 8.4% of bonds were held abroad, compared to 14.4% in September 2023. The war with Hamas began in October that year.

Addressing the lack of foreign interest in Israeli bonds, Tel Aviv University economist Professor Manuel Trajtenberg notes, “This resulted in the interest rate on Israeli bonds being increased to attract foreign buyers.”

Trajtenberg adds, “This has led to a 1.5% increase in the cost of debt repayment for the government.”

Additionally, the three major international credit rating agencies—Moody’s, Fitch, and Standard & Poor’s—have downgraded Israel’s credit rating since early August 2024.

Commenting on this downgrade, Dr. Tomer Fadlon from the Institute of National Security Studies in Tel Aviv says the agencies did not lower Israel’s rating out of fear that the Israeli government might default on bond payments.

Instead, he explains, “Credit rating agencies noted in their reports that they are concerned about the lack of a strategy for managing the fiscal deficit, as the government also needs to manage spending through 2025.” He added that Israel’s public finances are still in a relatively stable position.