Gaza Conflict Has Cost Israeli Government $585 Million After 12 Days’ Fighting

Defense officials are appraising the Finance Ministry of costs as the fighting progresses every one or two days, unlike previous operations.

Reuters

The current military action against Hamas and other hostile forces in the Gaza Strip has cost the government about 2 billion shekels ($585 million) after 12 days of fighting, senior officials said Saturday.

With the entry late Thursday of Israel Defense Forces ground troops – including infantry and armored corps personnel – into Gaza, along with the call-up of additional reservists, the cost per day of Operation Protective Edge has now also climbed, while the defense establishment has already presented a request for a supplemental allocation of a billion shekels to this year’s defense budget, as a result of the conflict.

In addition, it is estimated that the economy has sustained another 1.2 billion shekels in economic damage in the form of losses suffered by businesses, lost workdays and direct physical damage sustained in Israel as a result of the hostilities [see more coverage below].

Even though the direct costs to the treasury from the current operation will only be apparent once the fighting ends, military and Finance Ministry officials have said that periodic interim assessments are also being made. Before the current ground operation in Gaza, the estimate was that the fighting was costing the government about 110 million shekels per day.

Finance Ministry officials will begin discussions today with representatives from industry and the Histadrut labor federation over government compensation to residents and business in the south – where rocket fire has been the heaviest – for the indirect cost of the fighting. This includes loss of income suffered by businesses, as well as losses sustained by local residents due to their absence from work.

Treasury officials say the approach to compensation for businesses will be same as that applied following Pillar of Defense, the IDF’s 2012 operation in the Gaza Strip.

Unlike previous military hostilities, after which the defense minister and the army presented a detailed account of costs to the Finance Ministry, this time defense officials are appraising the Finance Ministry of costs as the fighting progresses every one or two days. Defense officials have made it clear, however, that they intend to insist on the government providing a budget allocation for the full cost of Operation Defensive Edge, rather than funding a portion of it from the existing defense budget.

However, Finance Ministry officials say the issue of the extent of an additional budget allocation will only be dealt with once the fighting has concluded, and would be fully funded as part of the 2014 budget rather than carrying over any portion of the war’s cost to next year. This is possible, they say, due to the relatively good state of this year’s budget, which would enable the government to absorb the cost of waging the current military operations, even if it means cutting nonessential funding from other budget lines. Among the factors permitting this has been the relatively high level of tax receipts in the first half of the year, despite a slight decline in June.

Finance Ministry officials expressed disappointment, despite the ongoing military operation, over the total lack of progress in the approval process for next year’s state budget. An initial budget draft has already been approved by Finance Minister Yair Lapid. In previous years, government deliberations on the following year’s budget were already nearing conclusion by late July. This year, though, they haven’t even begun. Prior to the IDF’s ground operation in Gaza, there had been talk of Lapid presenting the draft budget to Prime Minister Benjamin Netanyahu this week. It might be assumed, however, that Netanyahu now has more pressing matters to deal with.