BoI governor: Strong, independent institutions must be preserved

Governor of the Bank of Israel Amir Yaron is standing by his warning that damage to institutions such as the justice system is could harm Israel’s sovereign credit rating. Yesterday, Yaron appeared before the Knesset Finance Committee in a session on the proposed budget for the Bank of Israel, and was asked by committee chairperson MK Moshe Gafni why he had expressed his opinion on the matter.

“There’s a political debate in Israeli society, a debate that divides the country into extremely antagonistic camps,” Gafni said at the opening of the session. “Here, half the population thinks that reform is necessary. I too think that the Supreme Court is too powerful. You are the governor of the Bank of Israel, and suddenly I hear you talk about the judicial reform being liable to harm the economy. Why do you have to express a view on this matter? Do you think that the governor of the Bank of Israel should express a view when half the residents of the State of Israel think otherwise?” Gafni asked.

Yaron replied that he had imagined that he would be asked questions about this, and so he had prepared a written statement: “The country’s credit rating is determined in accordance with a broad range of criteria and reflects the country’s ability to repay its debt. Many studies have shown that strong, independent institutions are a vital component for the maintenance of a developed, prosperous economy. Accordingly, the credit rating agencies examine these areas as well. It is therefore important to ensure that these characteristics will continue to be preserved in any process that is introduced.”

Yaron added that Israel’s economy was strong, with high credit ratings. “This is not a momentary situation. The economy in Israel has been in a robust state for decades,” he said. “We came through the coronavirus crisis and the challenging exit from it relatively well. Today, the Israeli economy is dealing with challenges that many countries are dealing with, but it can be said with confidence that our position is good in comparison with most of the developed economies. The Israeli economy is at full employment with impressive growth, and inflation in Israel, which we at the Bank of Israel are of course determined to stamp out, is also among the lowest in the world. Israel is a country with a falling debt:GDP ratio. The ratio is already at the level it was at before the coronavirus crisis. I have described this as a strategic asset, and I still regard it as such.”

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Because of these things, Yaron said, characteristics such as strong, independent institutions should be preserved, in order that Israel’s credit rating should not be harmed.

Published by Globes, Israel business news – en.globes.co.il – on February 7, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.