Downgraded by War: Rising Debt and Credit Downgrades Make Israeli Bonds Increasingly Risky Bet for U.S. Investors
As Israel’s military campaigns in Palestine, Lebanon, and Syria continue, Israel’s debt load is skyrocketing and its economy is struggling to keep pace. In the last 19 months, Israel’s credit rating has seen two significant downgrades, with credit agencies specifically naming their ongoing military operations as a concern about their economic outlook. These recent credit rating downgrades and Israel’s ongoing reliance on debt markets and unstable economic forecasts makes Israeli debt a more risky investment than ever.
However, state and municipal U.S. treasuries and other institutional investors continue to buy into Israel’s debt through the purchase of bonds. For decades, many U.S. state, local, and municipal governments have invested public money in the State of Israel through the purchase of bonds. Recently, several state governments have increased their investment in a “symbolic” show of support for Israel, despite the increased fiduciary risk presented by these investments. Campaigns across the U.S. have called for divestment from these bonds, arguing that they are used to materially support apartheid and the violation of Palestinian human rights and there is a lack of financial transparency about the deals to purchase these bonds. To cast a broader picture of Israel’s debt landscape, this report provides an overview of Israel’s debt structure, its process of raising funds, and some of the key players involved.