The Bank of Israel released data on the debt and assets held by Israelis in foreign currencies for the third quarter of 2022.
• In the third quarter of 2022, the balance of assets held abroad by Israeli residents declined by approximately $19 billion (about 3 percent), to about $618 billion at the end of September. The decline was mainly due to a decline in the balance of assets in the tradable securities portfolio.
• Outstanding liabilities abroad declined by approximately $3 billion (about 1 percent) in the third quarter, to about $472 billion at the end of the quarter. The decline was primarily due to a decline in prices of Israeli securities held by non-residents, as well as changes in the exchange rate.
• Israel’s surplus of assets over liabilities vis-à-vis abroad declined in the third quarter by approximately $15 billion (about 10 percent), to about $146 billion at the end of the quarter.
• The surplus of assets over liabilities vis-à-vis abroad in debt instruments alone (negative net external debt) declined during the third quarter by about $4 billion (2 percent), to approximately $194 billion at the end of September.
• The ratio of gross external debt to GDP declined by 1 percentage point during the course of the third quarter, to about 29.7 percent at the end of September. The decline in the debt to GDP ratio in the third quarter reflected a decline of about 3 percent in the balance of external debt and an increase of about 1 percent in GDP (in dollar terms).
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1. The balance of Israel’s assets abroad
In the third quarter of 2022, the value of the assets held abroad by Israeli residents declined by about $19 billion (about 3 percent) to about $618 billion at the end of September. The decline in the balance was mainly due to a decline in the balance of investments in the tradable securities portfolio.
• The value of direct investments increased in the third quarter by about $2 billion, mainly as a result of profits accrued on investments.
• The value of the securities portfolio declined during the third quarter by about $9 billion (about 4 percent) mainly as a result of a decline of about $10 billion in the prices of foreign securities held by Israelis.
In addition, there were investments totaling about $2 billion in bonds, which were partly offset by realizations of about $1 billion in foreign equities. The business sector was responsible for most of the realizations in foreign equities (about $0.5 billion) and most of the investments in foreign bonds (about $2.1 billion). The banking sector realized foreign bonds totaling about $2 billion.
• The value of other investments abroad declined by about $0.5 billion (about 0.3 percent) in the third quarter, mainly due to changes in the exchange rate and revaluations of nontradable debt instruments totaling about $3 billion. The latter were partly offset by net investments totaling about $2.5 billion. Most of the investments were in credit obtained from the Israeli economy by nonresidents, totaling about $5 billion, and in investments by institutional investors’ net investments in foreign investment funds, totaling about $2 billion. These investments were partly offset by a decline in customer credit totaling about $4 billion and net withdrawals by Israeli residents and Israeli banks from deposits abroad, totaling about $1 billion.
• The value of reserve assets declined during the third quarter by about $8 billion (about 4 percent), to about $186 billion at the end of September. The decline was mainly due to price declines totaling about $4 billion. In addition, the dollar value of the reserve assets declined by about $4 billion as a result of changes in the exchange rate during the quarter.
• The composition of Israelis’ securities portfolio abroad: During the course of the third quarter, the share of equity instruments in Israeli residents’ portfolio abroad remained unchanged, at 44 percent. Accordingly, the share of debt instruments remained at 56 percent at the end of September.
2. Israel’s liabilities to abroad
The balance of Israel’s liabilities to abroad declined by about $3 billion (about 1 percent) during the third quarter, to about $472 billion at the end of the quarter. The decline was mainly due to declines in the prices of Israeli securities held by non-residents, and declines in the exchange rate.
• The value of direct investments in the economy increased during the third quarter by about $4 billion (about 2 percent), mainly due to net direct investments in share capital totaling about $6 billion, of which about $2 billion was in respect of accumulated profits on investments.
• The value of the securities portfolio declined by about $4 billion (about 2 percent) during the third quarter, as a result of declines in equity prices totaling about $2 billion, mainly Israeli securities traded in foreign markets. In addition, the dollar value of the investment portfolio declined by about $2 billion during the quarter due to changes in the exchange rate. These declines were partly offset by nonresidents’ net investments totaling about $1 billion.
Nonresidents invested about $1.5 billion in equities, mainly Israeli equities traded in Israel. These investments were partly offset by net realizations of bonds totaling about $0.5 billion. During the quarter, there were also repayments of government bonds totaling about $2 billion, which were partly offset by nonresidents’ net investments in makam totaling about $1.5 billion.
• The value of nonresidents’ financial portfolio on the Tel Aviv Stock Exchange, which makes up a part of nonresidents’ investments in Israel, increased by about $0.6 billion in the third quarter, to about $89 billion at the end of September. The increase in the value of the portfolio was mainly an outcome of net investments in bonds, totaling about $0.7 billion.
The value of other investments in the economy declined by about $4 billion (about 6 percent) in the third quarter, to $60 billion. The decline in the balance was mainly due to a decline in suppliers’ credit totaling about $3 billion.
The balance of liabilities in debt instruments alone, which makes up Israel’s gross external debt, declined by about $5 billion (3 percent) in the third quarter, to about $154 billion, mainly due to a decline of about $3 billion in suppliers credit, and the repayment of about $1 billion loans issued to Israelis by nonresidents.
The ratio of gross external debt to GDP declined by about 1 percentage point during the course of the third quarter, to 29.7 percent at the end of September. The decline in the debt to GDP ratio reflected a decline of about 3 percent in the balance of external debt compared with an increase of about 1 percent in GDP (in dollar terms).
3. Israel’s surplus assets over liabilities vis-à-vis abroad
A decline in outstanding assets that was greater than the decline in outstanding liabilities led to a decline of about $15 billion (10 percent) in surplus assets over liabilities vis-à-vis abroad, which totaled about $146 billion at the end of September.
4. Net external debt
The surplus of assets over liabilities vis-à-vis abroad in debt instruments alone (negative net external debt) declined by approximately $4 billion (2 percent) during the third quarter, to $194 billion at the end of September.
The balance of assets in debt instruments declined by about $9 billion in the third quarter, to about $348 billion at the end of the quarter, of which about $186 billion is the Bank of Israel’s foreign exchange reserves. This balance reflects a coverage ratio of 2.2 times the gross external debt.
