The total government debt, as expressed as a percentage of GDP fell another 3% in 2005, to 99%, completing an overall fall of 5% over two years. The government debt-GDP ratio rose 15% in 2000-03, during the intifada.
The fall in government debt over the last two years was caused by strong growth, stabilization of government deficits and the move by the Israeli economy from borrowing to lending in international markets. Forecasts for 2006 call for a further fall in the volume of government debt, provided that the economy grows by a minimum 4.8% and the budget deficit is below the 3% target at 2.5% of product. The budget deficit in 2005 was 2% of GDP.
The volume of government debt, which reached a high of 155% of product has decreased by a unprecedented 56%, most of which was reflected in a fall in rate of the government’s external borrowing. The government has indicated its desire to continue to bring borrowing levels down, a policy which has led to an upgrade in Israel’s credit rating on international markets from the current level A, a rating which is expected to rise to A+ after the upcoming general election.
Total government debt for 2005 was NIS 551.9 billion of which domestic marketable debt was NIS 253.3 billion or around 46% of product; external debt totaled NIS 145.4 billion or 26.3% of product while local non-marketable debt totaled NIS 152.6 billion or 27.7% of product.
Domestic tradable debt comprised NIS 106.2 billion in index-linked instruments; 147.1 billion in non-indexed instruments and NIS 300 in indexed dollar instruments?. The domestic non-tradable debt comprised NIS 112.2 billion in pension funds; NIS 32 in insurance premiums and NIS 9.7 billion in other items.
88% of the government’s external debt is in dollars, 9% in euros, with the remaining 3% in other currencies such as the Japanese yen and British pound.
Published by Globes [online], Israel business news - www.globes.co.il - on February 15, 2006