Israel's Military Spending in 2024 Pushes Debt-to-GDP Ratio Higher

Israel’s military expenditure in 2024 has surged to approximately NIS 100 billion ($28 billion), according to the Finance Ministry. This significant spending increase, largely due to ongoing conflicts with Palestinian terrorist groups Hamas in Gaza and Hezbollah in Lebanon, has notably impacted the country's debt-to-GDP ratio, which rose to 69% at the end of last year, up from 61.3% in 2023.

The sharp rise in Israel’s debt burden over the past two years reflects the hefty financial response to the security needs on both the military and civilian fronts during the wars. Despite this, Israel’s debt ratio still remains considerably lower than other global powers, such as the Eurozone at 88.1%, the United States at 121%, and Japan at 251.2%.

In total, Israel’s government debt rose to NIS 1.33 trillion ($370 billion) in 2024, up from NIS 1.13 trillion in 2023. Of the total government expenditure in 2024, NIS 621 billion ($174 billion) was allocated to various needs, with NIS 100 billion specifically dedicated to military operations. The country also raised NIS 278 billion during the year, with the majority (79%) coming through the local bond market.

Despite the increased debt, Israel’s financial markets remain robust, allowing the country to raise funds on a large scale. Finance Minister Bezalel Smotrich noted that the debt-to-GDP ratio in 2024 reflects the nation’s significant response to war-related needs. However, he stressed the importance of returning to a declining debt trajectory in the near future.

Rising Debt and Credit Rating Adjustments

Israel’s budget deficit reached 6.9% in 2024, the highest since the 11.6% deficit seen during the COVID-19 pandemic in 2020. This fiscal challenge, combined with the significant military expenditure, led to adjustments in Israel's credit rating by all three major rating agencies.