Israel slows bond issuance in September, but fiscal risks point to higher borrowing ahead

ISRAEL - In Brief 27 Aug 2025 by Sani Ziv
The government’s monthly issuance plan for September 2025 is to raise NIS 11.0 billion in tradable bonds on the local capital market in four weekly tenders, averaging NIS 2.75 billion per week. This marks a slower pace than in previous months: In July, issuance totaled NIS 12.37 billion, after a monthly average of NIS 12.16 billion in the second quarter and NIS 16.3 billion in the first quarter. In August, only, NIS 5 billion were raised (NIS 2.5 billion per tender in 2 weekly tenders), due to the summer holiday. Government borrowing year-to-date stood at NIS 97.8 billion, compared to NIS 115. 3 billion over the same period last year. However, the broad mobilization of army reservists and the decision to seize Gaza city would push the fiscal deficit higher in the coming months. This may require an upward adjustment in bond issuance later this year. The risk of a significant increase in the government budget stems from extraordinary defense expenditures in a scenario where Israel seizes Gaza City and eventually the entire Gaza Strip. Under this scenario, spending is projected to reach around NIS 180 billion, broadly in line with 2024 levels and nearly double the NIS 70-80 billion in annual defense expenditures prior to the war. Even in 2026, defense expenditures are expected to remain at roughly NIS 180 billion under a full occupation scenario. These additional costs reflect not only ongoing security operations, but also the expenses of military control, civilian administration, and the provision of basic supplies such as food. Government debt issuance (NIS billion) and government budget deficit (% of GDP) Source: Ministry of Finance, Accountant General Such elevated sp...

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