The Bank of Israel believes that the government may have to impose higher taxes to finance Israel's growing debt.
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In the abstract of its 2020 annual report the central bank wrote, "Due to the relatively low level of public commercial expenditure and the reduction in tax rates in the years prior to the crisis, and in order to finance the debt, which swelled during the crisis, the need may arise, when the time comes, to raise tax rates."
The bank remarked that its own monetary policy will need to be adapted to the amount of special instruments that it operated during the crisis, "and to maintain credibility in its ability to achieve its targets."
The report also noted that the government's fiscal policy in repsonse to the coronavirus crisis "very solid, mainly through grants intended to help households and businesses. This policy "increased disposable private income and moderated the impact on GDP," the bank said,
