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The price of the corona: a debt of one trillion shekels. Will taxes go up? - Walla! Of money

2021-04-20T14:16:07.399Z

Rise in taxes? The amount raised or borrowed by the State of Israel during 2020 was revealed. This is an unprecedented amount, about 230% of the volume of funding in a normal year. 72% of the amount was recruited in Israel



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The price of the corona: a debt of one trillion shekels.

Will taxes go up?

Israel borrowed NIS 265 billion during 2020. This is an unprecedented amount, about 230% of the volume of funding in a normal year.

72% of this amount was raised in Israel.

This is according to the debt report for 2020, published today by the Accountant General of the Treasury, Yahli Rotenberg, which hints at raising taxes. Total debt: about a trillion shekels

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  • The Accountant General

  • Corona

  • recruitment

  • Loan

Sonia Gorodisky

Tuesday, 20 April 2021, 08:57 Updated: 13:19

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The price of the economic corona: The government debt has reached almost a trillion shekels. In 2020, government debt increased by about 20% and stood at NIS 984 billion each, compared to NIS 823 billion last year.



The government deficit more than tripled during 2020 and has reached unprecedented proportions since the 1980s. Add to this the dramatic drop in tax revenues recorded at the beginning of the crisis and the ongoing budget, it will be possible to understand the magnitude of the event that took place in the offices of the Accountant General, responsible for providing financing for government and economic needs.



The need to finance the expenditure on unemployment benefits, the purchase of medical equipment, business assistance and more was immediate and the relatively small local market does not know how to "absorb" large-scale recruitments that are made in a short time. Fortunately, the economy entered the crisis on "favorable" terms with a low debt-to-GDP ratio compared to international and a high credit rating. During the crisis, Israel's credit rating was even reaffirmed twice,Which also gave a boost to obtaining loans at relatively low interest rates from abroad.

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The Accountant General of the Ministry of Finance, Yahli Rotenberg (Photo: Official Website, Gilad Artzi)

A hint of raising taxes?

In his opening report Rothenberg writes that "professional management of government debt, which combines long-term strategy and adjustments to short-term, supported the government's ability to increase substantially the volume of debt raised without the addition of significant risk and without having recorded an increase in the costs of current funding."



However, Rottenberg Implies that in the future the government will be forced to reduce its expenditures as well as raise taxes in the economy in order to reduce the inflated deficit. “As a forward-looking evidence, fiscal measures of convergence will be required. These measures are likely to be required on both the expenditure and revenue sides, with an emphasis on approving the state budget and economic growth. "It is very important to reduce the deficit after the end of the crisis and return to the consistent and continuous downward trend in the debt-to-GDP ratio," writes the Accountant General.



To Walla! Money, whether the Ministry of Finance



"I will not address it. I will just say that we are constantly making alternatives. We are really champions in making alternatives, but we have to examine it in the face of reality and we see reality like any citizen. It is clear to all of us that there must be political certainty and priority. , A state budget that can be given certainty to the whole system. This is the king's way. That is where we as a state should strive, given all kinds of situations we have many contingency plans, some are relatively easy to implement, some are complex in any constellation. "Legislation or a government decision, which even sometimes is difficult to accept today. So the way to implement changes is complex but possible."



Asked about the need to raise taxes, Rothenberg replied that he did not rule it out.



In the context of the need to reduce the deficit, Rothenberg said that in the future fiscal measures will be needed on both the revenue side and the expenditure side.

"It has to be done wisely, so as not to intensify the crisis. There may be things that also need to be streamlined."



Rotenberg added, in response to a question from reporters about the fact that part of the debt was spread over many years so that future generations would also have to pay it: "We need to make sure that our children have a reduced debt burden following the fiscal measures. They will have more."



Rotenberg added, in response to the question "Is there a chance that the State of Israel will not meet the debt burden": "No, there will be no such situation."

One of the items of expenditure required for the war in Corona.

There is a price for quick recruitment (Photo: Reuters)

High interest rates for one hundred years

As in previous years, most of the government funding came from the domestic market - the volume of issues increased threefold compared to 2019, gradually and with the assistance of the Bank of Israel's acquisition program. "The convenient and rapid access to the capital markets in Israel and abroad attests to the training of investors in the Israeli economy and its financial strength, and to the state's ability to establish broad funding in a short time, even during a global crisis," the Ministry of Finance said in a report.



In the last decade, Israel has stood out in terms of global comparison in reducing the debt-to-GDP ratio. In 2020, the debt-to-GDP ratio rose sharply by 12.4% compared to 2019. However, in an international comparison, this is not an exceptional figure - Israel is far below other developed countries, which have increased this ratio by more than 20%.



The report also states that against the background of the crisis in the external market, the use of global, private and public issues has expanded. In total, the volume of issues in the external market amounted to NIS 74 billion. In 2020, Israel also issued bonds for 40 and 100 years. It states that "the issues were characterized by high demand from prominent and high-quality foreign investors." It



should be noted that the interest rates at which 100-year bonds were issued were considered expensive, which was widely criticized at the time.

However, as mentioned, there was a need for immediate financing of large sums in a short time, which is not always possible in the local market.

Enjoy the credit of the rating companies

Rotenberg also addressed the issue of credit rating and said: "rating agencies look at things in a comparative, then * all discourse that says' Wow Tomorrow rating dropped is not true professional discourse. *



Risk Rating are risks if we follow the crisis we do not deal with the consequences of The crisis and we will not go back to the path of proper growth and fiscal convergence and other things, so we may be



issued

a yellow card.

In the meantime we enjoy the credit of the rating companies, because of dealing with the corona steps. "Most aid is on the same lines of support in the business world, the



unemployed and support for economic growth - and the rating agencies see it and say you're in the right direction. The rating agencies see it. In the end we hear from them that they see that we have actually managed to cope."

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Source: walla

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