Ministry of Finance Accountant General Yali Rothenberg made clear today at the Globes "Going Long on Israel" conference that there was no immediate prospect of an upgrade in Israel’s credit rating.
Talking to "Globes" macro reporter Oren Dori, Rothenberg, who recently met representatives of Fitch, said, "The main thing driving the perceptions of all the rating agencies is geopolitical risk. After the outbreak of war, we saw the reaction of the rating agencies, as they mainly monitored geopolitical developments. There has been a decline in the risk environment, because of changes in Lebanon, Syria, and Iran, while the US is dealing with the Houthis. I wouldn’t hold my breath for a rating upgrade, because the market will react before the rating agencies do."
Before the war, the accountant general raised dollar-denominated debt with a spread of 95 basis points over the equivalent 10-year US Treasury bond. In its most recent issue, in February, the Ministry of Finance gave investors a spread of 135 basis points. Shortly afterwards, fighting in the Gaza Strip resumed. "We are issuing debt in accordance with the annual plan, and trying to emerge with the lowest possible risk price," Rothenberg said. Israel’s risk premium reached a peak of 200 basis point at the time of the first missile attack from Iran in April last year, but Rothenberg explained that from November onwards the premium had gone into steeper decline, thanks to the election of Donald Trump as US president, and thanks to the ceasefire with Hezbollah.
"It’s important to return people home in the north and south
On the plans for dealing with the fiscal deficit, Rothenberg said there was no intention of making changes. "It’s important to provide certainty to the local market, which is our bread and butter. As a country, we are not closing financing channels. There are several financing channels, opportunities and risks. We have enough cash, and we don’t intend to raise quantities in the local market as in 2024, despite the developments in the deficit picture. Even now, we shall remain clear and transparent on the matter of the quantities of regular offerings, which are lower than in 2024."
The defense budget that was approved is NIS 109 billion net, before US aid, the highest ever, and so the accountant general made clear that "there’s an expectation of the defense establishment that it will abide by the budget." On the expenses of those evacuated from their homes because of the war, he said, "There are only 7,000 people in the hotels. It’s important to return people home in the north and the south. One of the most important things in the 2025 budget is the restoration activity, and rebuilding the north and the south."
On revenue and expenditure, Rothenberg said that the revenue side "is behaving well." On the expenditure side, the deficit target is 4.9% of GDP, which means cutting spending by NIS 619 million. "As you know, these are planning goals, and when the deficit is published, it’s actual figures. In the published figures, there was a fall to a 5.2% deficit, and it will probably continue to decline, with a rise towards the end of the year to about 5%. The growth forecast is currently 4%, a reasonable assumption in comparison with the 0.9% growth according to the Central Bureau of Statistics in 2024."
"I see 2025 as a stabilizing year for debt:GDP"
The accountant general mentioned that in a update review that Moody’s released last week, they had come into line on 4%. "We’re in a growth environment of 4%, with upside and downside. It’s important to bring the debt:GDP ratio into a declining trend. In the past four chaotic years, in the pandemic period there was an 11% deficit with 1.5% negative growth, and the debt:GDP ratio shot up to 70%, and now there was the war. It’s important to have growth engines, whether in a pandemic or in war."
Summing up, Rothenberg explained that the big test as far as Moody’s was concerned was meeting fiscal targets. "I see 2025 as a stabilizing year for the debt:GDP ratio. We’re at a little under 70%, and I hope we won’t reach 70%."
The conference is held in collaboration with Clal Insurance and is sponsored by One Zero bank and Ratio Energies.
Published by Globes, Israel business news - en.globes.co.il - on March 24, 2025.
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