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The world financial, and credit, crisis, has caught the state at a particularly sensitive time, just when its need to finance the national debt is reaching a new high.

Nevertheless, the treasury is trying to calm fears that the state might have a problem issuing new debt to finance the expected growth in the deficit next year.

The treasury says it raised large amounts earlier this year, and still has two important - and cheap - sources to raise further amounts, U.S. loan guarantees and the Israel Bonds.

A total of NIS 40-50 billion in government bonds will need to be redeemed between December 2008 and March 2009, a record amount.

These are mostly bonds issued at the beginning of the decade. Most of this debt will have to be rolled over into new bonds issued for this purpose.

In addition, the treasury expects a larger budget deficit in 2009 due to a drop in tax revenues, estimated now to be in the NIS 5-7 billion range, at the very least. This means Israel has been hit by the global credit crisis at exactly the time it needs to raise record sums.

As to the sources, Israel still has $3.8 billion in bonds it can issue under the U.S. loan guarantee program at the same interest rate as U.S. government bonds.

Israel also raises around $1 billion through the Israel Bonds program at a relatively low interest rate, as many of the Jews who buy the bonds view it more as a donation and are willing to settle for very low rates of interest. The treasury feels this amount could be increased significantly.