Increase in Israel's Defense Budget Raises Financial Burden on Families
The Israeli government's decision to increase the defense budget is expected to significantly impact household finances. According to a report from the Israeli Ministry of Finance, each family could face an additional cost of approximately 4,000 shekels (around $1,070) annually. This increase in defense spending, estimated at 10 billion shekels ($2.67 billion), may lead to a decline in productivity, costing the economy between 1.5 and 3 billion shekels ($400 million to $800 million) each year.
The report, presented by Samuel Abramzon, head of the ministry's economics department, indicates that the funding for the increased defense budget will likely come from either tax hikes or reductions in civilian spending. Abramzon cautioned against financing through increased fiscal deficits, which could burden the long-term economy. He noted that every 10% increase in the debt-to-GDP ratio could reduce Israel's economic productivity by up to $29 billion annually.
Economic Challenges Amidst Ongoing Conflict
Israel's defense spending is notably high compared to civilian expenditure, putting pressure on the middle class, which already faces elevated tax rates relative to the OECD average. Abramzon recommended reducing reliance on reserve soldiers and increasing the number of active duty personnel, including integrating recruits from the Haredi community and expanding combat roles for women. This strategy aims to alleviate the financial strains caused by the absence of reserve soldiers from the workforce.
The backdrop of these financial discussions is the ongoing conflict in Gaza, which has been described as a humanitarian catastrophe, resulting in over 146,000 Palestinian casualties, primarily among children and women, since the escalation began on October 7, 2023. The conflict has also extended to Lebanon, with airstrikes targeting various regions, including the capital, Beirut.
