Lapid: Israel's Budget Can Handle High Cost of Gaza Op

Finance Minister says there will be no need to raise taxes, but it will take a week or two to determine total impact of conflict on economy.

Zvi Zrahiya
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Israel's 2014 budget will be able to absorb the costs incurred during the month-long Gaza conflict and there will be no need to raise taxes, Finance Minister Yair Lapid said on Thursday.

Lapid said it would take a week or two before the government could determine the total impact of the conflict on the economy - both in terms of military spending and damage to the business sector - but that there was room to cover the cost in this year's budget.

A 72-hour truce took effect on Tuesday after heavy fighting that began on July 8, and Lapid said Israel was making all diplomatic efforts to ensure that things remained quiet.

"Israel has a very strong, sustainable economy. We are more than capable to digest this operation into the 2014 budget," Lapid, speaking in English, told Reuters.

"Of course it's an expense we didn't expect, but then again, why have a strong economy if not for these occasions in which you have to react to the unexpected."

Lapid earlier told a news conference: "Taxes will not be raised."

He noted that the budget deficit target for 2014 was 3 percent, and that prior to the month-long military operation, the actual deficit was running at less than 2.6 percent.

"This means we have room below the target for unexpected expenses," he said.

Lapid said the government was acting swiftly to compensate local businesses that were hurt during the military campaign and acknowledged that fresh discussions would be held ahead of the 2015 budget to address any changes in spending priorities, including new defense requirements.

The month of fighting between Israel and Hamas is likely to have cost the two sides a combined $8 billion, three-quarters of it suffered by Gaza, according to Israeli and Palestinian estimates.

For Israel, the costs of Operation Protective Edge are likely to add up about 7 billion shekels ($2 billion), Moshe Asher, the head of the Israel Tax Authority, said on Tuesday. A day earlier, Palestinian Deputy Prime Minister Mohammed Mustafa told Reuters that rebuilding Gaza would cost some $6 billion.

Speaking to Channel 10 on Tuesday, Asher pegged the decline in economic output across Israel as a result of the hostilities at about 4.5 billion shekels.  

Finance Minister Yair Lapid.Credit: Ofer Vaknin