Israel’s genocide in Gaza and military campaigns across the region over the past two years are heavily reliant on debt for financing. The last two years of genocide have led to a significant rise in public debt for Israel, prompting credit agencies to downgrade their credit rating twice in the span of 12 months. Nevertheless, Israel has continued to issue debt, borrowing billions of dollars both internationally and domestically to finance its military operations. Notably, recent public filings show that Israel is relying more and more on domestic debt compared to international debt. This is perhaps a response to increasing global calls for divestment and sanctions. International banks including U.S. financial giants, however, continue to play a pivotal role in Israel’s domestic debt market.
Currently, there are 12 banks serving as “primary dealers” for Israel’s domestic public debt market. These banks are key players in Israel’s financial system, providing crucial services that enable the trading of debt instruments nationally. Given their central position in Israel’s debt market, these 12 banks constitute key institutions in the state’s financing apparatus, enabling Israel to continue to issue bonds and borrow at the scale that it has needed to in order to continue the genocide and military escalations across the region.
This follow up to our previous report, Downgraded by War, presents a general analysis of Israel’s public debt based on its most recent SEC filings in Part 1, and highlights the key “primary dealers” of Israel’s domestic public debt in Part 2, the report underscores that, despite the substantial role of foreign investors, domestic borrowing remains the state’s main source of public debt financing at the moment. When it comes to Israel’s sources of financing, the global divestment movement, particularly in the U.S., has focused primarily on Israel’s external public debt, especially in the form of Israel Bonds. But given that Israel’s domestic debt is a much more substantial source of the Israeli state’s financing, any global actors that play a role in the domestic sovereign debt market are perhaps more strategic focuses for the divestment movement.