The Finance Ministry on Thursday announced that it has executed a private placement with a European financial institution amounting to €500 million ($600 million) over the next 50 years. This is the longest term debt the state has ever raised, previously opting for periods of no longer than 30 years.
Accountant General Rony Hizkiyahu's office said that the placement was at a fixed annual euro interest rate of 2%.
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The move came days after Bank of Israel Governor Professor Amir Yaron warned that the steps taken by the Treasury to curb Israel's growing budget deficit are too modest and that more drastic moves are necessary to prevent the deficit from exceeding 4.5% in 2019.
Israel's deficit currently stands at 4% of its gross national product.
The ministry said Israel's credit rating had led to high demand on the part of quality investors for its debt. In January, the state carried out a €2.5 billion ($2.9 billion) public offering. The investor in the current offering is one of the largest pension funds in Europe. It has not previously invested in Israeli government bonds, the financial daily Globes reported.
Deutsche Bank and Barclays served as underwriters for the placement.
"The test of the Israeli economy's strength lies with the faith global investors and financial institutions show in it," Finance Minister Moshe Kahlon said.
"This placement is a vote of confidence in Israel and in the Israeli economy, but more than that, it expresses the world's confidence that the State of Israel is here to stay."
Hizkiyahu noted that the "growing demand from leading investors around the world for Israeli long-term debt issues signifies the great confidence that exists in the Israeli economy and the ready access that Israel has to international markets. The placement for this period is part of the strategy of lengthening the duration of the state's debt, to give a low-interest rate for the long term."
