"An achievement for the Israeli economy, the Israeli people, and especially for future generations," Minister of Finance Moshe Kahlon today described the drop in Israel's debt-to-GDP ratio to 62.1%.
Ministry of Finance Accountant General Michal Abadi-Boiangiu today published an initial estimate of the ratio of public and government debt to GDP in 2016. According to the estimate, the ratio, which includes debts of the local authorities, is projected to drop substantially to 62.1%. Excluding the local authorities' debts, the ratio is projected to fall from 62.4% in the preceding year to 60.5%, a 1.9% decrease.
The upward revision of growth figures by the Central Bureau of Statistics pushed the debt ratio lower than expected. The ratio of debt to GDP is a key indicator of Israel's financial soundness, and is important in determining its credit rating. The final estimate of the debt-to-GDP ratio will be published in a few months in the framework of the annual report by the Financing and Credit section in the Ministry of Finance Debt Accountant General Department.
A comparative study by the Accountant General Department showed that Israel's success in lowering its debt ratio was exceptional on an international scale. Israel's debt-to-GDP ratio fell by 1.9% in 2015-2016, more than in any other Western country other than Germany and Slovenia. Since 2007, Israel has managed to cut its debt-to-GDP ratio by 11%, more than in any other developed country in the world, except for Norway.
The Ministry of Finance states that the main factors contributing to the reduction in the debt ratio are the nominal growth rate, the low budget deficit, and market factors, such as the negative increase in the Consumer Price Index, the strengthening of the shekel against the dollar and euro, and the ongoing fall in the interest rate on the government debt, a result of effective debt management by the Accountant General and her department.
Kahlon: I'm sorry we disappointed the naysayers and prophets of doom
Kahlon said in response at the beginning of the cabinet meeting that the debt reduction was "an economic achievement for future generations. I'm sorry we disappointed the naysayers and prophets of doom."
He added, "This news shows a sound, strong, and stable economy. We reduced Israel's debt by NIS 21 billion in the past year. This is of course with the professional and excellent management of Accountant General Michal Abadi-Boiangiu. The global markets regard us as a strong and safe economy, so investments will continue to flow this year like they did last year."
Kahlon went on to say, "The fall in the debt-to-GDP ratio means lower financing and interest expenses, more available money, more money for health, education, welfare, young couples, the disabled, senior citizens, Holocaust survivors, regular army soldiers, and all the social tasks that this government has taken upon itself.
"This achievement is an achievement for the entire Israeli government. Anyone who says that one or two ministers can do it is wrong. The prime minister's cooperation with me, together with all the government ministers, correct and responsible budget management without breaching the budget frame, and obviously effective and excellent utilization of the budget have brought us to this position.
"Cooperation between Netanyahu and myself has enabled us to manage a free economy with social sensitivity. The economy is growing, and its rewards are also reaching needy groups. We can now continue investing and creating more growth.
"I am truly sorry that we have disappointed all the prophets of doom over the past year, who swamped us with headlines about near-zero growth and rising debt that only goes up. We are sorry, and we have something more to tell you: we will continue to surprise everyone with fiscal responsibility and a free economy that will foster growth for future generations."
Summing up, Kahlon said, "The government's political stability is very useful and helpful. The fact that we passed budgets for 2015-2016 and 2017-2018 demonstrates stability. The economy needs stability, needs this horizon, and that is what we are providing. The measures we are taking are also for future generations. It is not just to finish this year. We are talking about 2020, 2021-2022, and after that. We are preparing the way."
Published by Globes [online], Israel Business News - www.globes-online.com - on January 22, 2017
© Copyright of Globes Publisher Itonut (1983) Ltd. 2017