Government debt-to-GDP drops to 73.3%

Though debt increased by NIS 24.8 billion in numerical terms, inflation and shekel depreciation lowered ratio.

By NADAV SHEMER
February 27, 2012 14:33
1 minute read.
Isreli currency.

Money cash Shekels currency 521. (photo credit: Reuters)

Government debt reached 73.3 percent of gross domestic product in 2011, compared to 74.9% the previous year, the Finance Ministry announced Monday.

Government debt actually increased by NIS 24.8 billion in numerical terms, reaching NIS 633b. The Finance Ministry said several factors were responsible for this, including the rise in inflation and the depreciation of the shekel against the US dollar.

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Public debt, which measures the government’s debt plus the debts of all municipal authorities, dropped from 76.3% to 74.7%.

Data provided by the Finance Ministry showed that both government and public debt have dropped gradually over the past decade. In 2003, government debt-to- GDP stood at 96.8%, while public debt-to- GDP stood at 99.2%.

“The continued decrease in our debt-to- GDP ratio, particularly when set against the backdrop of the marked growth of other countries’ debt-to-GDP ratios, testifies to the contribution this government’s fiscal discipline and long-term economic policies have made to economic growth and to foreign investment in Israel,” Finance Minister Yuval Steinitz said.

Treasury Accountant- General Michal Abadi- Boyanjo said credit-rating agencies place great importance on debt-to- GDP ratios when they make their decisions.

Another increase in Israel’s sovereign credit rating would make the country more attractive for foreign investors, she said.

Israel’s government debt is relatively low when compared to the 17-nation euro bloc, whose combined debt-to- GDP ratio is forecast by the European Commission to rise above 90% this year.

However, it is still not low enough, according to the Organization of Economic Cooperation and Development, which recommended in its biennial report on Israel in December that the government prioritize reducing debt to 60% of GDP by 2020.


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