bank of israel 248.88.
(photo credit: Ariel Jerozolimski)
Government debt rose 4.9 percent in the first six months of the year, to NIS 574 billion, from NIS 547b. at the end of 2008, the Finance Ministry reported Thursday.
Economists at the Finance Ministry's Government Debt Management Department said the increase was led mainly by the raising of NIS 26b. in bonds in the second quarter.
The government raised a total of NIS 60b. in the first half of the year, out of which NIS 48b. came from shekel-marketable bonds, NIS 10b. in foreign currency debt and the remainder in non-marketable shekel debt.
Israel's ratio of debt-to-gross domestic product, a measure of the country's ability to repay debt, which stood at 78% in 2008, is estimated to have risen to 82% in the first half of the year as a result of the increase in debt.
The 78% level in 2008 was already high by international standards. The average for OECD countries last year was 57% of GDP.
Last month the Bank of Israel said there was "great uncertainty" as to whether the government would be able to reduce the debt-to-GDP ratio after 2010, due to plans to increase spending and cut taxes.
The government had been gradually reducing the ratio, which reached a peak of 100% in 2003, in an effort to bring it down to about 60%, which the International Monetary Fund has said is the standard for developed countries.
One of the single largest items in the state budget is neither defense nor transfer payments, but debt repayment; the bigger the debt, the higher the interest payments, leaving less for the government to spend on health, education, welfare or defense.
In the government's budget proposal for this year and next, which was approved by the Knesset on July 15, the debt-to-GDP ratio is projected to climb to 87% after five years of steadily declining debt levels, according to Finance Ministry figures.
If spending rises as planned and tax reductions are implemented, the ratio may rise to as high as 98.5% by 2013, assuming growth recovery is slow, according to a Bank of Israel forecast. If growth recovers quickly, the GDP-to-debt ratio would increase to about 88% by 2013, it said.