Israel - Money

Israel's fiscal policy has focused on reducing the state's intervention in the economy and improving Israel's fiscal stance, namely, reducing the budgetary deficit as a percentage of the GDP and the government's debt relative to the GDP. The reduction of the deficit law was drafted in 1991 for the fiscal year 1992 and for the years to come. The law sets a maximum level for the budget deficit . Indeed, the budget deficit as a percentage of the GDP decreased from 4.9 percent in 1990 to 0.6 percent in 2000. However, Israel's ratio of government debt to the GDP still remains high compared to European countries. The internal debt, as a percentage of the GDP was reduced from 104 percent in 1989 to 70 percent in 2000; the external debt decreased from 39 percent in 1990 to 24 percent in 2000. Both the political right and the political left are committed to a sound fiscal policy. Since 1985 the Israeli government has not been allowed to borrow from the Bank of Israel and has had to finance its debt by issuing bonds. The Israeli government issues bonds in Israel, as well as in the United States, Europe, and the Far East.

The end of the disinflation process in Israel, which began with the 1985 Economic Stabilization Program, is aimed for 2003. Israel's inflation rate was cut from a worrying 444.9 percent annual inflation in 1984 to 18 percent in the late 1980s. Currently, the country has virtually reached price stability with inflation down to 1 percent in 2000. The inflation rate in the past 2 years has been consistently under the inflation target and is one of the lowest in the developed world.

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