On video: The government approved the state budget for 2024 15.01.2024/Video (upload): Omer Miron / L.A.M., Sound: Ben Peretz / L.A.M.
For the first time ever - Israel's credit rating goes down.
Thus, the rating company Moody's announced this evening.
Moody's lowered Israel's rating this evening to level A2 as well as the rating forecast to negative.
This is the worst scenario that could be expected tonight - both the downgrade and a negative outlook.
The main motive for lowering the credit rating of the State of Israel to the level of A2 is the company's assessment that the lateral consequences of the current conflict with Hamas, both during and after its end, substantially increase the political risks in the State of Israel, weaken the legislative and executive authorities and harm the fiscal strength of the country in the foreseeable future to the eye
Smotrich.
Failed to Convince/Image Processing, Haim Goldberg/Flash 90
Israel's credit rating has been set since 1998 and has not decreased since that time.
In April 2023, the rating company Moody's lowered Israel's rating forecast from "positive" to "stable", against the background of the legal revolution and its consequences.
This also happened in May 2020, during the Corona epidemic, even then Moody's lowered the forecast to "stable".
However, this is the first time since Israel began to be ranked 26 years ago, that there has been a drop in the ranking.
Recently, the Treasury tried to prevent the downgrade when senior officials of the ministry held talks with Moody's.
Accountant General Yehli Rotenberg was in the US for a "road show" designed to prepare the ground for future capital raisings as well as for meetings with the rating companies, for example by updating the planned steps.
Already at this stage, the estimates were that the likelihood of a downgrade was high, due to the dissatisfaction of companies The rating is from the new budget, which lacks deep changes, significant reforms, etc. The rating companies also take into account the state's past commitments that have not been fulfilled. The bonds have already traded in the recent period at a high yield that reflected the expected downgrade, and last night the shekel also weakened against the dollar due to the expected downgrade.
Netanyahu.
No longer Mr. Security, nor Mr. Economy/Official website, Mark Israel Salem
Less money for the state, serious damage to prestige
Lowering the credit rating has far-reaching implications regarding our economic future: as soon as a country's credit rating drops, it has to pay higher interest for the loans it has taken, an amount that of course comes from the same fund that also has to finance education, health, security, etc.
The result will be that the state will have less money left for the various services it needs to provide to the citizen.
That means less in welfare, infrastructure, education, medicine and more.
Besides the reduction of services to the citizen, it is possible that the state will also be forced to raise taxes in order to finance its activities.
Another importance is cognitive and psychological, when damage to the citizens' pockets is caused even before the downgrade, since the markets did not wait for the actual downgrade and are already demanding higher interest rates.
More in Walla!
Lowering the credit rating: all the questions and answers
To the full article
Last night he said to Walla!
The former accountant general, Prof. Yaron Zelicha, that there is no real reason for the downgrade since the currency balances held by the Bank of Israel are 3 times the state's debt.
According to Zelicha, "We have never had our credit rating lowered, it didn't even happen at the height of the second intifada when we were on the verge of bankruptcy. If it didn't go down then there is no reason why it should go down. The total government debt is very low, so there is no fear of the government's debts in shekels and Credit rating in foreign currency is stable, because the currency balances of the Bank of Israel exceed three times the government debt in foreign currency."
Zelicha points the finger of blame at the government and Finance Minister Smotrich, for mismanaging the event: "I can say with certainty that the government did a bad job. They missed the opportunity to put the permanent expenditure beyond the temporary war expenditure, that is, to separate the structural, permanent debt from the temporary debt arising from the war".
spillage
"Even at the height of the second intifada, when we were on the verge of bankruptcy, the rating did not go down"/official website, -
Regarding the budget, Zelicha says that "the Minister of Finance presented a budget with only cosmetic changes that do not respond to the growth and reduction of expenses required, but make the situation more serious. He intends to raise taxes, which will cause a slowdown in the economy. Then not only does spending increase, so does the ability to carry out reforms There is no depth in public sector wages or changes in the budget pension, when 4-5 billion are spent on coalition funds.
"Furthermore, there are zero reforms related to the cost of living, and this is when all the growth potential of the economy lies in such a struggle.
Our prices are 35 percent higher than in Europe and the United States, and the difference between the basic expenditure that should have been here and the high prices we pay is a tremendous unrealized growth potential.
"So if there is no lowering of the cost of living, the economy will not grow, there is no increase in tax revenues and increasing fixed expenses - all this does not reassure the credit rating companies, on the contrary. I am afraid that the Ministry of Finance has fed them too many frogs that they will not be able to swallow and I am afraid, For the first time in many years, Israel's credit rating has gone down."
More on the same topic:
Credit Rating
credit rating
Bezalel Smotrich
Benjamin Netanyahu
War of Iron Swords
Gaza war
Cost of living
Moody's
Bank of Israel
Ministry of Finance
Yaron Zelicha