Sources inform "Globes" that Ministry of Finance Director General Yarom Ariav and Deputy Accountant General Ami Landau will meet tomorrow with Standard & Poor's president Deven Sharmer. Sharmer will be in Tel Aviv for the 34th annual Conference of the International Organization of Securities Commissions (ISOCO), which is being held in Israel for the first time. The Ministry of Finance is calling the meeting routine, but "Globes" understands that the two will discuss a most critical matter for the economy: the fate of Israel's credit rating.
Sources also inform "Globes" that representatives of the two other major credit rating agencies - Moody' and Fitch - are scheduled to pay their regular visits to Israel next month and Ministry of Finance officials are intensively preparing for these meetings.
Israel's 2009 budget deficit is expected to be 6% of GDP, although a number of measures are yet to be approved by the Knesset, and there is not a majority to pass them. These include imposing VAT on fruit and vegetables and tourism services, and recognizing childcare expenses as tax deductible.
Consequently, Ministry of Finance officials are concerned that Israel's credit rating could be lowered. This would result in higher interest repayments on government bonds and a rise in inflation, and would make it difficult to issue bonds on the local securities market.
While S&P's president does not determine the credit rating, Ministry of Finance officials do expect him to ask how Israel expects to lower its budget deficit and what will happen to the GDP:debt ratio, which is high by Western standards; it currently stands at 78%, and is expected to rise to 88% by the end of 2010, as a result of the increased deficit.
Published by Globes [online], Israel business news - www.globes-online.com - on June 9, 2009
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