Planned revisions by the newly-sworn in government of Prime Minister Benjamin Netanyahu could affect the country’s sovereign credit rating.
By Erin Viner
“If the announced judicial system changes set a trend for a weakening Israel’s institutional arrangements and existing checks and balances this could in the future present downside risks to the ratings. But we are not there yet,” S&P Global Ratings director Maxim Rybnikov told Reuters.
As the primary main credit analyst for Israel, Rybnikov said that while risks to the country’s ratings are currently balanced the situation is subject to change, and that ratings action could come sooner than a planned review in May if deemed necessary.
S&P Global Ratings (previously Standard & Poor’s) is an internationally-recognized agency that issues credit ratings for public and private companies, governments and governmental entities.
Backed by Netanyahu, who is on trial for corruption charges he denies, Israeli Justice Minister Yariv Levin presented a sweeping “reform of governance” last week includes limiting Supreme Court I rulings against government moves or Knesset laws, while increasing politicians’ input over nominations to the bench.
While proponents of the changes say they will restore balance between the legislative, executive and judiciary, critics believe the proposals threaten the country’s democracy.
When asked by reporters earlier this week if he is willing to risk Israel’s credit rating in exchange for pushing through the judicial overhaul, Netanyahu insisted that the reforms would strengthen democracy and the country’s economic policies.
S&Ps Rybnikov acknowledged that Israel’s economy remains solid, with its first surplus in 35 years in 2022, high foreign exchange reserves and falling public debt burden.
“We are not very concerned on the fiscal front despite announcements of higher spending by the coalition partners,” he said, explaining, “In the short term, Israel has some fiscal room for temporary relaxation of fiscal policy.”
Jerusalem is currently formulating a 2023 state budget which must be approved by the Knesset by late May. Finance Minister Bezalel Smotrich has pledged to maintain fiscal responsibility alongside the introduction of new measures to ease living costs and reduce inflation.
Director Rybnikov also, however, expressed concern over potential ramifications policies by the right-wing Netanyahu government might have vis-à-vis the Palestinians. Israel’s 37th government, which took office last month, has promised to bolster Jewish communities on land that Palestinians demand for a state.
“The primary concern for us would be the … security situation which could be undermined in a scenario of more hardline policies,” he said, adding, “Hardline rhetoric that undermines the fragile situation in the West Bank could generate risks as well… if we see more protests, this is not going to be good news also for the economy.”
The past year has seen some of the worst violence in the West Bank districts of Judea, Samaria and the Jordan Valley in years, amid a deadly surge of Palestinian terror attacks that killed 31 people in Israel during 2022.