What Is Israel’s National Debt and How Is It Managed?

National debt represents the total amount of money a government owes to its creditors, both domestic and foreign. It accumulates over time when governments spend more than they collect in revenue, leading to budget deficits. Understanding a nation’s debt provides insight into its financial health and its capacity to meet future obligations, reflecting past fiscal policies and influencing future economic stability.

Key Metrics and Composition

Israel’s national government debt reached approximately $310.8 billion USD in December 2023. By the end of 2024, this figure rose to about NIS 1,329.3 billion, which translates to roughly $352.5 billion USD. This increase reflects the government’s financing needs and various market factors. The debt-to-GDP ratio, a measure comparing a country’s debt to its economic output, stood at 60.3% in December 2023 for Israel’s government debt.

The public debt-to-GDP ratio, which includes broader public sector liabilities, was 62.1% in 2023 and increased to an estimated 69.0% in 2024. The central government debt-to-GDP ratio specifically rose to 67.6% in 2024. Projections indicate that the government debt-to-GDP ratio is expected to remain around 69.0% by the close of 2025. Historically, Israel’s debt-to-GDP ratio saw a significant decline from 98% in 1990 to 60% in 2019, though it temporarily peaked at 71.7% in 2020 due to the COVID-19 pandemic.

The composition of Israel’s national debt includes both domestic and foreign components. In 2024, approximately 79% of the gross debt issued was tradable domestic debt, with non-tradable domestic debt accounting for 2%, and foreign debt making up the remaining 19%. Israel’s external debt, owed to creditors outside the country, increased to $149.8 billion USD in the first quarter of 2025.

The debt is primarily structured through various financial instruments, including government bonds and short-term Treasury bills (T-bills). Specific types of bonds offered include fixed-rate bonds, CPI-linked bonds, and floating-rate notes. The State of Israel also issues various types of “Israel Bonds” like Jubilee, Maccabee, Sabra, Mazel Tov, and Shalom Bonds, which cater to different investors with varying maturities and minimum investments. These bonds are sold to a diverse group of investors, including domestic institutional investors and foreign entities such as U.S. state and municipal pension funds, corporations, insurance companies, and non-profit organizations.

Factors Influencing the Debt

Several factors contribute to the levels and changes in Israel’s national debt, with government spending being a primary driver. Significant increases in expenditures, particularly for defense and civilian needs, have directly impacted the debt. For instance, defense spending escalated to NIS 169 billion in 2024 from NIS 98 billion in 2023, largely due to ongoing conflicts. Total government expenditure reached roughly NIS 621 billion in 2024, with approximately NIS 100 billion allocated to supporting war efforts.

Economic growth also plays a role in influencing the debt-to-GDP ratio. Periods of low GDP growth, such as the 1% growth observed in 2024, can lead to a higher debt-to-GDP ratio. Conversely, rapid economic expansion, like the significant GDP growth in 2021 and 2022, helped to reduce the debt-to-GDP ratio by boosting government revenues.

Israel’s budgetary deficit reached 6.9% of GDP in 2024, a notable increase from the 4.2% deficit recorded in December 2023. While Israel achieved a budget surplus in 2022, recent events have shifted the fiscal balance back to a deficit. Interest rates also influence the cost of servicing the national debt, as higher rates increase the government’s borrowing expenses. Fluctuations in interest rates, along with inflation and exchange rates, added approximately NIS 30 billion to the debt stock in 2024.

Debt Management Strategies

Israel manages its national debt through government borrowing and strategic financial operations. The primary method for raising funds is through the issuance of various types of government bonds and short-term Treasury bills. These securities are issued by the Ministry of Finance’s Government Debt Management Unit (GDMU) through a multi-price competitive auction process, utilizing platforms like the Bloomberg Auction System.

The Israeli Ministry of Finance, particularly through its Accountant General’s office and the Financing, Debt, and Credit Division, bears the main responsibility for managing the national debt. This includes funding the government’s deficit, overseeing treasury management and liquidity, and handling state guarantees.

The GDMU’s Front Office is responsible for the actual issuance of government bonds, both in domestic and foreign currencies, and for managing hedging transactions. The Middle Office focuses on risk management and developing long-term debt portfolio strategies, while the Back Office handles all payments, receipts, and accounting related to government debt. The Bank of Israel also plays a role by providing relevant government debt data and managing certain historical debt instruments.

Debt repayment and refinancing are integral to the management strategy, with new bond issuances often covering maturing obligations. The GDMU also conducts regular buyback and switch auctions, allowing the government to redeem shorter-maturity bonds and issue longer-maturity ones to manage its debt profile.

To attract investors, Israel actively engages with both domestic and international markets. The Israel Bonds organization is instrumental in selling bonds globally, particularly to diaspora Jewish communities and institutional investors, having raised over $54 billion worldwide. The government also utilizes private placements with strategic investors.

Regular investor marketing meetings are conducted across Europe, Asia, and the United States to maintain transparency and promote the “Israel Brand” within the credit sector. The low risk of Israeli bonds, coupled with a history of never missing an interest or principal payment, makes them attractive to a broad range of investors. Additionally, the U.S. loan guarantees program provides an extra layer of security, making borrowing more economical for Israel.