The events that occurred on October 7th shocked the world. While many believe Israel is justified in its response, it’s hard to overlook the destruction that the Hamas fighters and the Israeli army have left in their wake. Many news sources have focused solely on the humanitarian costs of the conflict. However, this article also seeks to uncover the financial impact of the current violence and how a prolonged war will affect civilians and the global economic community. For those wondering about the real costs of the war in Palestine, here is a more complete picture of the amassing debt and loss of life on both sides of the conflict.
What are the Financial Costs of the War in Palestine?
At the beginning of January, the total cost reached $60 billion. Although the figure seems staggering, it includes the war budget as well as financial aid for those affected by the violence.
Unfortunately, there seems to be no end in sight. As the conflict continues, the human and financial losses continue to rise But, what exactly is the price of war and what are the specific costs of the war in Palestine?
1. The war has brought the Palestinian economy to a halt.
The most obvious impact has been to those living in the state of Palestine. The conflict has led to significant job losses with 89% of employees out of work and 182,000 jobs gone.
According to the Palestinian Central Bureau of Statistics, its economy had lost $1.5 billion by December 2023. It also estimated a loss of $25 million a day in the private sector. To provide some context and scope of these losses, it means that Gaza’s economy shrunk by 80% in the last quarter of 2023 alone.
With the restriction of movement, many workers in the West Bank have also been negatively impacted and have lost income. Since the war will likely continue in the months ahead, this will cause even greater economic burdens.
2. It costs hundreds of millions of dollars to care for the displaced populations.
Gaza has long been dependent on foreign aid. Even before the outbreak of the current fighting, around 80% of the population needed humanitarian aid. However, the situation has become even more dire in recent months. To alleviate the poor conditions for the displaced populations, several countries, including the US, have been sending financial aid.
Despite these efforts, the quality of life in the refugee camps is still very poor. The United Nations estimated that Palestinians need more than $1.2 billion for urgent humanitarian relief. So far, about half of the funding has been provided. Sadly, it will require much more to sustain basic needs, especially as more people seek aid.
3. The United States is spending billions to support the Israeli government.
Although the United States has many interests overseas, Israel has been the largest single recipient of US aid since its formation. So far, it has received over $300 billion from the US alone. When averaged over time, this comes to approximately $3.3 billion a year. Although many Americans and people around the world have sought to end this support, the US remains its strongest ally. So much so that President Biden has promised an additional $14 billion in 2024.
4. The Israeli government is incurring a massive amount of debt.
There is no doubt that the current conflict is the most expansive and expensive military campaign in Israeli history. The Bank of Israel estimates that the war is costing the Israeli economy approximately $600 million per week from work absences. This represents roughly 6% of its weekly GDP. Furthermore, the Treasury Minister has said the direct daily costs for Israel are about $246 million.
Currently, the state budget is facing a $30 billion deficit. However, this could increase to $50 billion if the conflict continues for more than 8-12 months. This debt reflects the surge in government spending for its soldiers, bombs, and bullets. To counteract these costs, it will require both tax hikes and budget cuts which will dramatically impact daily life. It will also result in reduced services for the public at large.
In the broader scope, analysts estimate $400 billion in economic losses for Israel over the next decade. This number reflects the reduced investments, disruption to the labor market, and decreased productivity growth.
5. It will take billions of dollars and many years to rebuild.
The war has caused catastrophic damage to both the infrastructure and the economy. When calculating the real costs of the war in Palestine, you must consider that more than 60% of the residential structures in Gaza have been destroyed. Since the initial report, there has been even more damage. The United Nations Office for the Coordination of Humanitarian Affairs reported that more than 41,000 homes were completely destroyed and over 222,000 received significant damage. On the other side, there are property damage estimates of between $5 – $7.5 billion to Israeli communities near the northern and eastern borders as well.
Infrastructure and communications systems have also taken heavy damage. Conservative estimates show that 92% of major roads were also damaged, with over 50% completely annihilated. Additionally, half of Gaza’s power structure and 46% of its commercial buildings are also in ruins.
When the conflict ends, it will take tens of billions of dollars and many years to recover from this level of destruction. And, there’s no telling how long it will take to return to its previous level of economic activity.
6. There are serious concerns that the conflict could cause a global recession.
There are also serious concerns that the war in Palestine will have long-lasting consequences beyond its borders. We are already seeing a drastic reduction in regional commerce and greater enforcement of stricter financial regulations. Furthermore, many shipping firms have opted for alternate shipping routes with longer transport timelines to avoid attacks on their vessels.
Although this will have a more immediate impact on the Middle Eastern and European economies, it will still have a domino effect on all their trading partners. In the coming months (and possibly years), it will lead to increased energy costs, resulting in higher food prices as well. Furthermore, many people have also started boycotting brands over their support of Israel. These social movements could have unforeseen economic implications. The longer conditions persist, the more costly it will become.
What are the Humanitarian Costs?
While the financial costs of the war in Palestine are staggering, the extent of the humanitarian costs is even greater. Tens of thousands have already lost their lives. However, the aftershocks of the events will resonate among millions of people for generations to come.
1. Many people have nothing to go back to.
Based on numbers from the UN, over 75% of the population in Gaza already had refugee status (approximately 1.7 million). However, more than 2 million people are displaced and have nowhere to go.
Several neighborhoods were razed to the ground and thousands of businesses were destroyed. As mentioned before, 41,000 homes have already been reduced to rubble and more than 222,000 have sustained serious damage. With these facts in mind, the World Bank estimates that more than 1 million Gazans no longer have a home.
In hopes of survival, most Palestinians are fleeing to the south and huddling in makeshift shelters. As they wait for an end to the campaign, they have nowhere to return to and little hope of leaving the country.
2. Those forced to flee don’t have access to basic needs.
With little access to supply chains, there are acute shortages of basic supplies (food, water, medical supplies, fuel, etc.) Aid organizations fear that the Gaza Strip is on the edge of famine and a catastrophic health crisis. The majority of hospitals have been forced to close, with only 12 of its original 36 still attending to patients. Even these are semi-functioning and don’t have enough staff or supplies to tend to the dying and wounded.
Furthermore, aid deliveries and border crossings are extremely limited. Right now, an average of 95 trucks are allowed per day, a significant decline from the 500 allowed before the war. World leaders are calling for greater relief measures to alleviate the suffering.
On the other hand, 16 countries have also announced that they will stop all financial support to the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). Although it was the primary source of humanitarian aid in Gaza, there were serious allegations of some of its employees’ involvement in the October 7 Hamas attack. This announcement could prove to be the tipping point in an already impossible situation.
3. Tens of thousands of civilians have lost their lives.
Those who have been following reports know that this round of violence started when Hamas crossed into Israeli territory, murdering 1,200 civilians and taking 253 more hostages. Although some have returned to their families, 134 hostages remain in Gaza.
On the other side, the Palestinian people have reported the bulk of the losses. As of the first week in March, the death toll has surpassed 30,000. The Gaza Health Ministry says 70% of casualties represent women and children, but it is unable to confirm how many of these were militants. These numbers come from figures reported by hospitals and reliable media sources. However, the real number is likely much higher since the Health Ministry is struggling to keep accurate records with failing systems.
Conservative estimates also reveal that more than 10,000 are missing – either buried in the rubble or shallow, unmarked graves in the ruins of neighborhoods and along travel routes. There are nearly twice as many wounded who need medical attention. While these reflect the most current reports, these numbers will continue to rise as the fighting continues.
4. Relief workers are also victims of the violence.
Those who have come to the aid of innocent civilians are also experiencing casualties. Relief organizations and healthcare workers are also in danger and realizing the humanitarian costs of the war in Palestine.
Aid vehicles have repeatedly come under fire and several of their employees have died. So far, 350 medical staff and 88 media workers have lost their lives since the war started. Many more have been wounded and lost loved ones.
5. South Africa has filed a case of genocide against Israel with the International Court of Justice (ICJ).
The actions of the Israeli government in Palestine have sparked protests around the world. These have only increased in recent months. One of the most serious allegations comes from South Africa.
Its government has filed an official complaint with the ICJ, claiming the actions of the Israeli government and IDF are genocidal. The report states that Israel aims for complete destruction of the Palestinian nation and ethnic group. It goes on to say that its army is failing to prevent harm to citizens and includes public rhetoric from Israel’s political and military leaders that support genocidal intent.
Israel is fiercely rejecting the claim, emphasizing it is at war with Hamas, not the Palestinian people. It will take years to reach a verdict, but the action has left its mark on the conscience of the international community.
What Does the Future Hold?
The underlying conflict between Israel and Palestine is extremely complex and goes far beyond a response to the attack on October 7. The seeds of discord are deeply rooted, and the actions committed on both sides are not easily forgotten.
In response to the current military action, Israel claims that the primary objective is to secure the hostages and dismantle Hamas organizations. The Israeli Defense Forces intend to continue going after the Hamas leadership. But, the issue is that they continue to hide behind Palestinian citizens, embedding themselves in residential neighborhoods and populations. As Lt. Col. Peter Lerner explained, “When they are hiding in the civilian arena, there are civilian consequences.”
It’s also difficult to say what the total costs of the war in Palestine will be and how this will impact the global community as much depends on the outcome of the campaign. However, RAND International has created a tool that evaluates the potential costs of five specific scenarios.
While many things remain uncertain, one thing is clear. As General Sherman so succinctly said, “War is hell.” Looking at the hellish landscape of what remains of Palestine, it’s hard to disagree. Although there may not be any clear winners, millions have already lost everything.
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