Three months after Hezbollah agreed to a cease-fire, the damage inflicted by Israel’s armed forces on the Iran-backed Shiite group is becoming clear: Its military has been severely degraded and its finances are strained to the point that it is struggling to meet its commitments to followers.

Hezbollah, designated as a terrorist organization by the U.S., has long operated as a vast state-within-a-state in Lebanon, supplying jobs and social services to members. It also pays relatives of Hezbollah fighters killed as well as followers who lose homes or businesses during conflicts.

But the spiraling bill from its latest war is making many of those payments impossible.

Some residents say that the group’s primary financial institution, Al-Qard Al-Hassan, in recent weeks has frozen payments for compensation checks that had already been issued. Some members say they have received no support at all.

“I have so many questions about why we were dragged into this conflict, the suffering we endured and who will compensate for our losses," said Jalal Nassar, a restaurant owner in the Lebanese city of Tyre.

He said he has had to pay $100,000 to repair the restaurant he owns, which was flattened by airstrikes.

Nassar said a construction-and-engineering arm connected to Hezbollah visited the eatery to assess the cost of repairs but hasn’t provided assistance. The war, he said, “was a mistake."

The World Bank in November estimated that the cost of damage to physical structures amounted to $3.4 billion, with about 100,000 homes partially or fully destroyed. Widows and families of fallen members also need help, and the wounded need medical treatment and a regular income.

Exacerbating Hezbollah’s financial challenges are efforts under Lebanon’s new U.S.-backed government to stem the flow of cash to the group from Iran, its main supporter. The fall of the Assad regime in Syria has also proved a blow, cutting off a route for weapons and cash through a country once allied with Hezbollah and Tehran.

Hezbollah publicly acknowledges its weakened financial and military position, and for now its support at least outwardly appears strong. The group’s new secretary-general, Naim Qassem, has said the group is committed to rebuild what was destroyed but urged the Lebanese state to fulfill its responsibilities as well.

Hundreds of thousands of people attended Sunday’s funeral for Hassan Nasrallah, Hezbollah’s former leader who was killed by an Israeli airstrike in September. Many in Lebanon still revere Nasrallah and the organization for building one of the world’s most potent nonstate militias in opposition to Israel and for becoming a force in Lebanese politics.

“Hezbollah no longer has the cash to compensate its constituents," said Lina Khatib, an associate fellow at think tank Chatham House. Loyalty to the group “is likely to wane in the long term when Hezbollah’s constituents realize that it can no longer offer them financial, political, or security benefits."

Hezbollah was founded in the early 1980s as both a militia bent on destroying Israel and a political faction that could represent the Shia Muslim community in Lebanon, which makes up about a third of the country’s 5.7 million people. With funding help from Iran, Hezbollah set up a social security system for Shia Lebanese, providing healthcare, banking services and jobs for the party’s thousands of members.

Experts have estimated the group has in past years maintained an annual budget of around $1 billion for benefits, salaries and other costs, excluding military expenses.

But its operations were badly hurt late last year when Israel intensified a long-simmering conflict with airstrikes and covert attacks. The conflict started after the Oct. 7, 2023 assault by Palestinian militant group Hamas on southern Israel that Israeli authorities say killed about 1,200 people and sparked the war in Gaza. Hezbollah began attacking Israel with missiles and drones to show solidarity for Palestinians.

Israel’s fall campaign killed Hezbollah’s senior leadership, left thousands dead and temporarily displaced more than a million people. The damage predominantly affected southern Lebanon and parts of the capital, Beirut, where Hezbollah rallied support.

Since a late-November cease-fire, Hezbollah has attempted to reorganize. Hezbollah-run committees have evaluated hundreds of thousands of damaged homes and the group has issued $630 million in payments to people for loss or damage to their homes, according to an official at Al-Qard Al-Hassan, the quasi-bank connected to Hezbollah.

Individual payments have amounted to $12,000 to $14,000 a year for rent, along with extra payments for furniture.

More recent signals, however, illustrate Hezbollah’s cash crunch. Fadwa Hallal, a resident of the southern Lebanese town of Habboush, said she received a $7,000 compensation check for damage to her home on Jan. 28, but was later told by Al-Qard Al-Hassan that it temporarily was unable to pay. Hallal finally cashed her check after about a month but heard others had faced longer delays, she said.

Hezbollah appears to be giving priority to payments for those in need of urgent shelter, rather than businesses that were also damaged, said Moussa Chmaysani, a car dealer and head of the Merchant Association in Lebanon’s Nabatieh province.

“I received $12,800 in emergency shelter assistance," he said. “But I lost nearly $100,000 worth of inventory and have not received a single dime in compensation."

Other costs are also spiraling, including payments for the wounded who need medical treatment and a regular income. A person familiar with Hezbollah told The Wall Street Journal that the group lost 5,000 fighters in the conflict, with more than 1,000 severely wounded, including many who lost limbs or suffered permanent vision loss.

Israel has evacuated most of its troops from southern Lebanon but said it would maintain a presence in five strategic locations along its border with Lebanon. Lebanon’s newly elected president, Joseph Aoun, said that the country’s military is prepared for a transfer of control.

A person close to Hezbollah told the Journal that an internal memo was distributed to its combat units, ordering militants who weren’t originally from areas in southern Lebanon to vacate their positions, and that Lebanese army troops would be allowed to take control of the area in accordance with the cease-fire.

“The party has suffered heavy losses," the person said, with some military units completely dismantled. But Hezbollah has partially replenished its ranks with fighters who had been stationed in Syria, the person added, with some restructured units ready for any resumption of fighting. “The group has been weakened, but it is not defeated," the person said.

However, the election of Aoun with U.S. support in January was seen as a signal of Hezbollah’s waning influence in Lebanon. Since then, Lebanon has formed a government with fewer parliamentarians affiliated with the group. Hezbollah’s rivals for years have accused it of undermining or co-opting state institutions.

The U.S. and European countries now hope that Aoun can diminish Hezbollah’s control over the Lebanese economy and state. But the new president faces a gargantuan task: Lebanon’s government has been in an economic crisis for years and will require help from foreign donors for reconstruction, with few countries so far committing cash.

Hezbollah’s call for the government to absorb much of the cost of rebuilding suggests it will likely use Aoun’s administration as a foil for the group’s inability to maintain its financial commitments and to assuage frustration among its base, said Mohanad Hage Ali of the Malcolm H. Kerr Carnegie Middle East Center in Beirut.

“The Lebanese government wants to weaken Hezbollah’s role in society, but it has to deliver," he added.