Israel’s economy has emerged from the chaos of a war that threatens to turn into a regional conflict for nearly a year, but rising borrowing costs are starting to put pressure on the financial architecture.
According to Israel’s Finance Ministry, the direct cost of financing the Gaza war through August was 100 billion Israeli shekels ($26.3 billion). The Bank of Israel estimates that the total could rise to 250 billion shekels by the end of 2025, but that estimate was made before Israel’s incursion into Lebanon to battle Hezbollah, which will increase the number even further.
That has led to credit rating downgrades, amplifying economic effects that could last for years, while the cost of insuring Israel’s sovereign debt against default is near a 12-year high and the budget deficit is ballooning.
