The Finance Ministry of Israel announced on Wednesday that the public debt decreased dramatically last year to 60.9% of GDP compared to 68% in 2021, which is lower than in most of Israel’s Western counterparts. This result became possible due to robust economic growth and a budget surplus that was achieved for the first time since 1987.

The Finance Ministry used the revenue surplus to pay off around NIS 20 billion in outstanding debt.

According to governmental officials, 6.3% economic growth and a reduction of billions of shekels in government debt led to a substantial fall in the debt-to-GDP ratio in 2022. The government debt ratio, which excludes public-sector and municipal debt, fell to 59.2% of GDP from 66.2%.

Chart: Past debt to GDP ratios and earlier projections for 2022.

Last year, Israel had a budget surplus of 0.6% of GDP, following a 14% increase in tax revenue that was greater than predicted. It was the first annual surplus in Israel in 35 years.

Accountant General Yali Rothenberg said, “The cumulative decline in the debt-to-GDP ratio over the last two years and the return to the downward trend are critical in maintaining financial stability and fiscal flexibility.”

Prior to COVID, Israel’s government managed to cut its debt-to-GDP ratio by around 11% to 59.5%, which is a relatively low figure in historical terms, especially when compared to leading economies. However, as a result of the state’s financial assistance program established in response to the pandemic, the debt-to-GDP ratio increased to 71.7% in 2020.