Operation Cast Lead direct cost estimated at NIS 5b

Meitav Group chief economist Ron Eichal made the estimate to "Globes".

"Compared with the NIS 330 million per day cost of the Second Lebanon War, it is quite reasonable to estimate the cost of Operation Cast Lead at NIS 250 million per day. Therefore, the cost of the campaign to date is NIS 5 billion," Meitav Group strategist and chief economist Ron Eichal told "Globes" today.

Eichal is referring to the direct cost to the security forces for the campaign. His figures do not include the loss to GDP and productivity caused by the fighting. He noted that the 33-day Second Lebanon War in 2006 cost NIS 11 billion.

Eichal noted, "60,000 reservists were called up for the Lebanon war, but far fewer this time. Another key difference is the use of the Air Force, which is the largest cost of any war. There is a huge difference between a fighter jet that takes off from Mitzpeh Ramon and flies to Beirut and a jet that takes off from Mitzpeh Ramon and flies to Gaza."

Eichal says that the Ministry of Finance estimates the cost of a jet flight time at NIS 50,000-60,000 per hour. During the first days of Operation Cast Lead, some Air Force jets were operating over Gaza 24 hours a day. The Air Force was an active participant throughout the campaign, accounting for most of the campaign's cost.

Ministry of Finance officials are already calculating how much the IDF general staff will demand for a budget supplement for the campaign and exactly how much of this money can be spread out over the coming years. In 2006, when the Ministry of Finance allocated billions of shekels to the IDF following the Second Lebanon War, the money was placed in "boxes"; in other words, it was not counted as part of the regular budget because the ministry said that this was a one-time expense. The US and international rating agencies did not like this not-very-clever accounting trick and forbade its reuse.

The Ministry of Finance increased the December 2008 budget deficit in order to reduce the 2009 deficit, which is expected to reach 5-6% of GDP. Analysis of ministry figures published a few days ago indicate that the December 2008 deficit totaled NIS 14 billion, compared with analysts' predictions of NIS 9 billion at most. In this way, the ministry overperformed by NIS 4.5 billion so that these expenses would be recorded as part of the 2008 deficit instead of the 2009 deficit. The move amounted to bringing forward the deficit by 0.5%.

Published by Globes [online], Israel business news - www.globes-online.com - on January 19, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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