Israelâ€™s total government debt rose to NIS 544 billion at the end of the first half of the year, but was little changed in real terms since the end of 2004, the Bank of Israel said Sunday. Government debt totaled NIS 539b. at the end of December 2004. The internal shekel debt fell 1 percent in real terms and the external foreign-currency debt expressed in shekels rose roughly 4%, as the shekel weakened against the dollar during the first half of the year. In the relevant foreign currencies, the value of Israelâ€™s external debt actually fell roughly 2%. Reduced government dependence on domestic capital raising following cuts to the deficit made possible by privatizations and a high economic growth rate helped bring down the internal debt, both in absolute terms and in relation to Israelâ€™s gross domestic product. Though the proportion of the total debt to the GDP sank slightly, the debt still equaled 102% of the GDP at the end of June, the same as at the beginning of the year. Israelâ€™s debt had risen against the GDP from 88% in 2000 to 104% in 2003. Although it has fallen somewhat since, the debt-to-GDP ratio is still higher than the average 76% among Organization for Economic Co-operation and Development (OECD) member states and 79% for the European Union. EU member states are required by the Treaty of Maastricht to keep their debt below 60% of GDP, or at least show progress in that direction. A low debt-to-GDP ratio is seen by domestic and foreign investors as one of the most important indices of an economyâ€™s stability, the central bank noted. â€œThe government must continue reducing its deficit in the coming years, until the debtâ€™s burden on the GDP is brought down to internationally accepted levels,â€ the central bank said, adding that this would help bring down yields, develop the private bonds market, improve Israelâ€™s credit rating, and reduce the cost of fundraising for both the government and the countryâ€™s business sector. Noting that Israel spent 6.7% of its GDP on interest payments in the first half of 2005 significantly more than the 1.9% spent by OECD members and 2.9% in the EU the bank stressed that continued efforts to lower the government debt would also bring down interest payments and increase itâ€™s flexibility in setting priorities in the state budget.