Israeli Prime Minister Benjamin Netanyahu is pursuing an occupation of Gaza, which could cost “Israel” 120-180 billion shekels ($32-49 billion) annually, Yedioth Ahronoth reported. The Finance Ministry warns this could push the budget deficit to 7% and trigger another credit rating downgrade.
According to Gad Lior, an economic reporter and analyst, funding this decision would require “dramatic” cuts to education, health, and social welfare budgets, along with new taxes, all while the deficit continues to rise.
The approval of the 2026 budget is also being delayed, raising concerns that next year may begin under a temporary continuity budget, which could harm the Israeli economy.
Finance Ministry sources calculated that calling up 250,000 reserve soldiers and covering ammunition expenses would cost approximately 350 million shekels daily, or 10 to 11 billion shekels per month, with total costs reaching 30 to 50 billion shekels by the end of 2025.
Occupying Gaza to cost tens of billions of shekels
In addition, controlling and administering Gaza would require another 10 to 15 billion shekels each month, on top of billions more needed to set up temporary shelters and provide humanitarian aid for Gaza’s civilians, including food, water, medical supplies, and electricity.
The sources added that with no budget department director and the 2026 budget still unfinished, economic risks are growing and “Israel” may see its credit rating cut again in the coming two months.
Meanwhile, the current budget is expected to be adjusted soon to redirect part of the 42 billion shekels originally approved for security agencies following the war on Iran. Economic experts at both the Finance Ministry and the Bank of Israel estimate that the annual deficit could reach 6% this year, and that’s before accounting for any potential costs associated with the Gaza occupation.
According to the newspaper, the Israeli public should prepare for austerity measures, including new taxes, an extended freeze on planned tax bracket reductions, and severe cuts to education, healthcare, welfare, and infrastructure budgets.
