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The treasury seems about to achieve a long-awaited goal, but it won't hold for long. Before the fighting up north began, the Finance Ministry predicted that it could finally lower Israel's debt-GDP ratio to 89%, the lowest level in Israel's history. But can  it continue to lower debt, or keep it that low? That's another question entirely.

In 2003 the ratio was 106%, and internationally acceptable debt levels are about 70% of GDP.

But the enormous budgetary demands for 2007 by various ministries, mainly Defense, and concern of an economic slowdown, will probably make this achievement a one-time-only event.

The years 2004 and 2005 had been characterized by high economic growth. GDP-debt was 100% in 2004, down from 106% in 2003.

Debt-GDP is one of the main ratios analysts look at when judging a country's economic strength and stability. A low debt level is expected to help Israel during these difficult times, and help the state keep its international debt rating. It will also help Israel remain an attractive destination for foreign investors.

The treasury, which produced the debt estimates before the war in the north started, is expected to use the new figures to improve Israel's economic image in the world.

The drop in the debt ratio in 2006 is a result of two major factors. The first is technical, and relates to changes made in the way the debt is calculated by the Central Bureau of Statistics. These changes will lower the ratio by about 5 percent for 2006.

The second major - and more important - factor is the impressive pace of economic growth in the last year.

The rapid growth has created a NIS 6 billion surplus in 2006. In addition, there are further revenues such as the taxes on the Iscar deal, NIS 4 billion; the sale of Israel Discount Bank and Bank Leumi shares by the state, NIS 3.5 billion; and savings from changes in management of the government's cash reserves, another NIS 5 billion; as well as other revenues.

Together, all this will allow the state to pay off billions of shekels of debt in 2006, and therefore reach the record low debt ratio.

While the new debt-to-GDP ratio may reflect Israel's economic stability, the deterioration of the security situation may make such achievements a thing of the past - and 2007 may mark a rise in debt once again.

The fear is that the various ministries will receive large increases in their 2007 budgets. The Defense Ministry has already received an additional NIS 500 million this year, and is requesting NIS 4-6 billion more for next year. At the same time the war is expected to cut economic growth, and the expected payments for war damage and losses will certainly be in the billions.

Also, the figures for June, even before the outbreak of hostilities in the north, were not as good as previous months.

June tax revenues were a billion shekels less than the average of previous months. This has already reduced the forecast surplus for 2006 from NIS 10 billion to only NIS 6 billion (not including the Iscar deal tax revenues).

Nevertheless, no one today can guess what the tax revenue and economic growth figures will be for the coming months.