Rising war costs pinch Israelis

More taxes. Less disposable income. Higher food, water and electricity bills. As 2025 starts, Israelis face a $11-billion (40-billion-shekel) war bill that will likely deepen social and political divides.
That is this year's estimated cost of a long list of taxation hikes and spending cuts, including a 1% rise in value-added tax, that has just gone into effect. Every household will feel the squeeze and it's one of the main topics of conversation on media. Business newspaper 'The Marker' created a highly popular online calculator that estimates the price tag per household.
"It will cost us more than 17,000 shekels ($4,658) a year," Adi Einbinder, a working mother of three with a husband in hi-tech, said on a recent radio show. At 40 years old, she and her husband are forced to lean on their parents. "We're supposed to be helping them right now. We feel trampled."
In the 15 months since Hamas' brutal attack on Israel, Israel's military spending is on a long-term upward trajectory. The govt will increase the defence budget by an estimated annual minimum of 20 billion shekels - 1% of current GDP - over a decade. The 2025 defense outlay totals 107 billion shekels ($30 billion), 65% higher than pre-war spending. "Until now, the Israeli public hasn't directly borne the budgetary costs of the war," says Momi Dahan, an economics professor at Jerusalem's Hebrew University. "They were funded by govt loans. Now the govt will borrow less and take the rest from the public."
While fighting has devastated Gaza and large parts of Lebanon, Israel's $525 billion economy has also suffered. The govt estimates GDP rose just 0.4% last year, making Israel one of the slow-growing developed economies. There will be a rebound in 2025, but it will be limited by the austerity measures.
In 2024, Israel borrowed more than 260 billion shekels ($71bn) in international and domestic markets, almost a record for the country, to fund the war effort.