the bank of israel.
(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
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.