Weak shekel adds to business debt
Weak shekel adds to business debt Photo by Bloomberg
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Business sector debt grew in May by NIS 7.4 billion, or 0.9%, as the shekel's depreciation caused foreign currency debt to rise in value, the Bank of Israel reported on Wednesday.

Of the sector's total debt of NIS 791 billion, more than a quarter - some NIS 224 billion - is linked to foreign currency.

Market sources estimate that most forex debt is linked to the U.S. dollar, which has gained about 8% against the shekel in the past three months. That translates into a NIS 15 billion increase in business-sector debt.

Household debt rose as well in May, by 1.1%, to reach NIS 373 billion, the central bank said. Mortgage debt also rose by 1.1%, or NIS 2.8 billion, to reach NIS 265.5 billion. That brought the rise in mortgage debt since the start of the year to 2.7%, or NIS 6.9 billion.

The weakening shekel had little to do with the increase in household debt, because only about NIS 8 billion of that debt is linked to foreign currency.

The rise has more to do with people taking out new home loans. The danger in these loans may come from accelerating inflation: Just under half of all mortgage debt, is linked to the consumer price index.

In June, new mortgages totaled only NIS 3.9 billion, down from NIS 4.1 billion in May. But the June figure was still higher than the monthly average for the year, by about NIS 500 million.