World owes Israel $23b - but state keeps borrowing

Israel's gross external liabilities rose by $16.5 billion in 2005, mostly thanks to foreign investment.

Since 2002, Israel has changed from being a borrower to a lender. At the end of 2005, the world owed Israel over $23 billion, compared with $12 billion at the end of 2004, the Bank of Israel reported today. Global debt to Israel rose 92% in one year.

Most of the world’s debt to Israel is to the private sector - over $22.7 billion. The world owes Israel’s banks just over $3.1 billion. Israel’s public sector, headed by the government, continues to borrow on international markets, in order to recycle debts and cover budget deficits.

Israel’s gross external debt fell by $250 million in 2005 to $75.5 billion. The surplus of short-term assets (debt instruments) totaled $40 billion at the end of December; an increase of $4.7 billion in 2005, due mainly to the considerable increase in deposits abroad by the banks. Net short-term debt is an important measure in assessing an economy’s risk, and the surplus of short-term assets is likely to contribute to an improvement in Israel’s credit rating.

The Bank of Israel states, “The balance of Israel's external liabilities totaled some $153 billion at the end of December 2005, a rise of $16.5 billion in 2005.” This is a positive development, caused by sizeable foreign direct and portfolio investment.

The Bank of Israel cited with satisfaction, “The increased profitability of the business sector, the contraction of the budget deficit, the improved geopolitical situation and the accelerated pace of privatization (the sale of Bank Leumi (TASE: LUMI) and Israel Discount Bank (TASE: DSCT)) enabled Israel's economy to attract an unprecedented amount of nonresident investment and to benefit from the global trend of international flows of capital into the emerging markets.”

Published by Globes [online], Israel business news - www.globes.co.il - on February 27, 2006

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