22.1.2007
 
The Government to Offer 2-Month to 4-Month Treasury Bills
The Bank of Israel and the Ministry of Finance agree on cooperation in government debt management and the issue of short term bills by the government
 
The Bank of Israel and the Ministry of Finance, represented by the Accountant General, today signed an agreement to formalize and expand the cooperation between them. The agreement broadens the central bank’s advisory activity on subjects related to the management of the government debt, and enhances the two-way flow of information, which will reach a level of complete transparency not only with regard to historical information, but also relating to forecasts. The Ministry and the Bank will cooperate in planning the issue on the capital market of both makam (issued by the Bank of Israel) and short-term government bills (Treasury bills).
The closer cooperation between the Ministry of Finance and the Bank of Israel is the outcome of an initiative of the Deputy Governor, Professor Zvi Eckstein, and the Deputy Accountant General, Mr Yuval Bronstein, and is part of the implementation of the recommendations in the report on this subject by the State Comptroller. The Bank of Israel and the Accountant General also agreed that as early as in 2007 the Government Debt Management Unit of the Accountant General will issue short-term (i.e., 3-month) bills, as part of the Accountant General’s reform of the management of government debt aimed at streamlining the management of the government’s cash flow. Concurrently the Bank of Israel will halt the issue of 3-month makam and will start preparing for the transfer of the issue of makam to the Bloomberg system used for trading in government bonds that enables foreign players to participate directly from abroad.
The Minister of Finance, Mr Avraham Hirchson, said that the two-way flow and transparency of information between the Ministry and the Bank will present the overall view of the economy and will be of direct benefit to it. The Minister added that in the future the Ministry of Finance will cooperate with the Bank of Israel in all relevant areas of activity. This cooperation, which led to the decision to raise money via short-term bills, will reduce the government’s debt servicing costs and will enable funds to be redirected towards other government objectives.
The Governor of the Bank of Israel, Professor Stanley Fischer, commended the increased cooperation between the Ministry of Finance and the Bank of Israel, and expressed confidence that it will help reduce the cost of government borrowing and boost the development of the domestic capital market. The Governor added that this is a good example of the successful collaboration between the Ministry of Finance and the Bank of Israel, which will benefit Israel’s economy and the general public.
The Ministry of Finance and the Bank of Israel stress that there are many considerations favoring the issue of short-term debt by the government––it will enhance the ability to manage the government’s cash flow providently, will give better control over the duration of government debt, will grant the government greater operational flexibility, etc. The issue of Treasury bills will enable significant streamlining of and financial savings in government borrowing, in the context of the reform of the management of the government’s cash flow carried out by the Accountant General in the last two years. If hitherto we had to take on debt for five or ten years to finance a large expenditure in two months’ time, we can now manage the government’s yearly cash flow more efficiently, and thereby save the taxpayer the expense of unnecessary interest payments.
The Deputy Governor of the Bank of Israel, Professor Zvi Eckstein, and the Accountant General, Dr Yaron Zelekha, welcomed the cooperation between the Ministry and the Bank, and expressed their confidence that it would make an important contribution to Israel’s economy and in particular to the development of the financial markets.