Finance Ministry Director General noted that the deficit will remain high at between 5% and 5.5% of GDP in 2010 as tax revenue slow down
Yarom Ariav, Finance Ministry Director General, said last week that Israel’s budget deficit may reach 6% of gross domestic product this year, forcing the country to raise money abroad for the first time since 2006.
In an interview held in Jerusalem, Ariav noted that the budget deficit, which would be the widest since 1995, will remain high at between 5% and 5.5% of GDP in 2010 as tax revenue slow down.
The Ministry forecast show that the government would be required to increase borrowing to about 40 billion shekels ($9.4 billion) this year from 9.1 billion shekels in 2008.
Ariav emphasized that Israel will have to raise money abroad to avoid pushing up interest rates at home, where the Bank of Israel hascut the bank rate to 0.75% to bolster economic growth and begun buying government bonds to lower long-term rates.
It isunderstood that some of the foreign borrowing will be done with $3.8 billion remaining from $9 billion in guarantees the U.S. gave Israel in 2003.