Israel’s national debt stands at roughly an entire year’s worth of gross domestic product (GDP). If the Governor of the Bank of Israel has his way, some of the extra revenue generated by the nation’s growing economy would be devoted to reducing the size of that debt.
Fischer said that Israel spends NIS 33 billion ($7.17 billion) in tax revenue every year just to pay the interest on the county’s debt burden. That amounts to 6% of the nation’s GDP. Fischer pointed out that reducing that debt would free up more money for other budgetary purposes, such as health, education, and defense.
He said that in 2005, Israel’s debt declined somewhat, dropping from 104% of GDP to just under 100%. But that level is way above that of most OECD countries, whose debt ranges from 40%-60% of GDP.
Fischer explained that countries which have high ratios of debt to GDP are more susceptible to budgetary pressures and sensitive to changes in international interest rates. He said that Israel’s international credit rating is also influenced negatively by the rate of debt. As a result, Israeli firms are charged higher interest rates for financing projects. This makes Israeli business less competitive in world markets.
Fischer emphasized that Israel’s economic policy must be geared to continuing long term growth. Such growth, he said, is the only way to provide Israel with the resources necessary for dealing with social issues and reducing poverty.
Fischer said he favored spending more money on health and education for the needy. Providing access to improved education and health care services is essential for ensuring that all Israelis have an equal opportunity to succeed and advance in the job market, he said.