Governor of the Bank of Israel: public debt will rise to 83% of GDP

“The costs of the war reached 405 billion shekels, that is, more than 17% of GDP. In 2024-2025, budget adjustments were still made, and at each point in time the budget was structured to show a decrease in the debt-to-GDP ratio in the future. Then I could say: “Gentlemen, after the adoption of the budget, our debt/GDP ratio is not growing, and perhaps even decreasing.” Unfortunately, this cannot be said today. The debt/GDP ratio is in growth phase,” said the chairman of the central bank.

According to Yaron, if the plan to increase the defense budget by NIS 350 billion over ten years is implemented, the debt will reach 81% of GDP by 2035, and 83% of GDP if American aid ends. By comparison, at the end of 2025, after two years of war, the debt/GDP ratio was 68.6%.

Professor Yaron explained that the current upward trajectory of the debt is due to the simultaneous increase in military spending and the reduction in tax burden that the government continues to implement.