Additional expenditures – the American delegation's flights, security expenses and operational expenses – will be funded, separately, by the US government.
The visit, which begins March 20, is expected to last three days.
An official visit by such a senior figure entails major expenses in several fields, led by security. Thousands of police officers will be tasked with securing Obama's entourage and all the sites he will visit, including Ben-Gurion Airport, the roads the president's convoy will travel on and the King David Hotel in Jerusalem, where he will be staying.
Some areas will be turned into sterile zones and will be supervised by police and army helicopters accompanying the hundreds of entourage members, foreign journalists and Israeli hosts, in tight cooperation with the American security forces accompanying the president's entourage.
Another major Israeli expense is for preparing the suites and rooms for the entourage members at the King David Hotel, funding special multi-course meals at a cost of hundreds of thousands of shekels, hosting Obama at the President's Residence, and tours of the country.
The entourage's stay at the hotel is estimated at NIS 2-3 million ($540,000-810,000). Due to the security arrangements, entire floors will be blocked and will not be available for "regular" guests.
The different expenses also include flower arrangements, red carpets, some new, in places Obama will visited (like the Knesset and President's Residence), the entourage's special requests for communication arrangements, medical equipment if necessary and a fleet of cars for the entourage members.
Obama to tour Tel Aviv?Meanwhile, the Tourism Ministry is looking into options for Obama's tours of Israel, in addition to the Yad Vashem Holocaust Museum. The ministry has been asked to suggest different sites and submit the proposals to Obama's preparation team.
The suggestions include a visit to Masada and an observation of the Dead Sea; a tour of Christian sites such as Nazareth, Mount Precipice and the Sea of Galilee area; and Tel Aviv, focusing on Jaffa and the Neve Tzedek neighborhood.
A tour is also planned to the newly renovated visitor's center at at Mitzpe Ramon in memory of Israeli astronaut Ilan Ramon and an observation of the Ramon Crater, the Hula Lake Park at the height of the bird-watching season, and the Druze sector.
"It's hard to calculate the exact expenses from the state budget," said a Treasury official. "For that purpose we must receive the full and final plans from the relevant ministries and the President's Residence, as well as from the police and other security forces."
Obama's visit to Israel will also include short stops in Jordan and likely in the Palestinian Authority as well.
"There is no doubt that such a visit is worth the cost, but it's clear that its cost is 10 times higher than a visit of any other president or head of state," a senior Treasury official told Yedioth Ahronoth. "In case of a visit by another head of state, the costs may total several hundreds of thousands of shekels, and in special cases – between half a million and one million shekels."
The funding of official visits abroad by Israel's president, prime minister and ministers totaled some NIS 80 million ($21.5 million).
Danny Sadeh contributed to this report